Creditors should use issuers’ desperation

There’s a war that’s always being fought in financial markets – sometimes beneath the surface, sometimes in plain view – between the interests of debt holders and shareholders.

Through the depths of the recent depression in financial markets and the worst revelations of corporate excess, that conflict has been low intensity. The interests of bondholders and equity holders have become, briefly, aligned. What’s been bad for one group has been bad for another. In extremis, both sides have compromised to salvage the most they can from the wreckage of the latest corporate collapse.