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Vulture funds are used to grab the assets of poor nations. The British parliament recently banned the use of British courts for the practice, it is time for the US to follow suit.

A hospital in Sierra Leone, where painkillers often are not available to the poor. When vulture funds are used to grab assets of poor countries, the people suffer, 10/09/07. (photo: Ruth Fremson/The New York Times)

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0 # Guest 2010-04-01 08:13

This procedure is very prevalent in the securities industry on a much smaller scale. When a public company is nearing bankruptcy and has no assets, basically a shell, a new party comes along and offers to take over control. As part of the change of control the new party looks at all the liabilities of the shell company then sends out offers to the creditors to pay ten cents on the dollar for assignment of the debts to them. Once they have purchased the debt for a tenth of its value they have the shell company settle the debt with them for its face value usually settled by the issuance of shares to them. Those shares later become free trading and are part of the control. They can also be sold into the public market. This is normal procedure in many public securities markets.

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