Corporate Distress, Credit Default Swaps, and Defaults: Information and Traditional, Contingent, and Empty Creditors

Federal securities law seeks to ensure the quality and quantity of information that corporations make publicly available. Informational asymmetries associated with companies in financial distress, but not in bankruptcy, have received little attention. This Article explores some important asymmetries in this context that are curious in their origin, nature, and impact. The asymmetries are especially curious because of the impact of a world with credit default swaps (CDS) and CDS-driven debt “decoupling.” The Article explores two categories of asymmetries. The first relates to information on the company itself. Here, the Article suggests there is fresh evidence for the belief that troubled companies may prove lax in securities law compliance and for the existing “final period” explanation for such laxity. The Article also offers two new explanations: one based on the requirements for class action certification in Rule 10b-5 litigation and the other based on uncertainties as to private enforceability of “Management’s Discussion and Analysis” disclosure requirements. Building on the existing analytical framework for decoupling, the Article also examines a less obvious category of asymmetries: “extra-company” informational asymmetries flowing from the CDS and CDS-driven debt decoupling activities of third parties. Such third-party activities can be determinative of a company’s prospects, but reliable public information on the presence, nature, and magnitude of such activities tends to be scant. Here, even the company itself, not just investors, may not have the requisite information, including information on the highly counterintuitive and unusually complex incentives that such third parties may have. Unlike traditional creditors, “empty creditors with a negative economic ownership” as well as certain other buyers of CDS protection can have strong incentives to intentionally cause corporations to go bankrupt even when bankruptcy would make little sense. Such third parties may profit not only from actual defaults on financial covenants—at just the right times—but also from artificially manufacturing “faux” defaults or seizing on real, but largely technical, defaults. The Article examines such CDS and “net short” creditor matters through the lens of four examples. The three most important and recent of these examples have not previously been considered in the academic literature: Norske Skog (a Norwegian lumber company) (involving Blue Crest and GSO Capital Partners), Hovnanian (an American home builder) (involving GSO Capital Partners), and Windstream Services (an American telecommunications company) (involving Aurelius)

Comorbidities of Medicare Beneficiaries with Alzheimer\u27s Disease in Florida, 2010

Comorbidity associated with Alzheimer’s Disease (AD) is highly prevalent but largely understudied. In this study, we sought to determine 1) the prevalence of AD by race (White, African American, and Hispanics); 2) 20 chronic conditions’ commonly comorbid with AD and the prevalence, mortality rate, and health care expenditure of common AD and comorbid condition by race. A sample of 86,875 Florida 2010 Medicare beneficiaries aged 65 and older with 12 months of fee-for-service (FFS) enrollment were used in this study. In the present analysis, the prevalence of AD was highest among elderly Hispanic beneficiaries. Among 20 chronic diseases, heart disease (Heart Failure, Ischemic Heart Disease, Atrial Fibrillation) were the most prevalent, most deadly, and most costly comorbidities associated with AD. Hypertension and Hyperlipidemia were highly prevalent comorbidities. Persons with AD had an increased risk of depression. Persons with AD and Chronic Kidney Disease were associated with a high likelihood of mortality and high health care costs. Hip Fracture was one of the most costly comorbid conditions, and was also associated with a high mortality rate for Whites and Hispanics. The results revealed a comprehensive picture of certain comorbid conditions associated with AD and suggested the need for further investigation in this area