ST Alpha - "The collateral isn't worth the value of the loan. He's also, apparently, not in default. -- nm" (Reading a Post)

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In response to "So, the richest man in the world took out a loan and the lenders don’t think he can pay? Take the fucking collateral" by Will Hunting

The collateral isn't worth the value of the loan. He's also, apparently, not in default. -- nm

Posted by pmb (aka pmb) Aug 20 '24, 09:29

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Responses:

He's still making payments so no default. On a more reasonable level of principle, kind of a dream customer. - JD Aug 20, 09:33 4
- Nope. That's not how it works for these loans. They have a maturity date (probably 5 years). At that point the loans are due. Usually they will be - pmb Aug 20, 09:37 3
  - They’ll have to take a haircut on the principal, for sure, but that’s a five-years-from-now problem -- nm - znufrii Aug 20, 09:54 1
    - Only about 2 years at this point. That’s when they start thinking about exits. -- nm - pmb Aug 20, 10:00
  - Ah. Thanks for the explanation. Hence the whole hung description. - JD Aug 20, 09:39
How is that possible? Isn't the purpose of collateral to get something of equal or greater value? -- nm - David Aug 20, 09:30 4
- if the collateral is stock share and the price drops... -- nm - Max Aug 20, 09:33 3
  - Then congrats on now owning 5% of Tesla or whatever he pledged. - Will Hunting Aug 20, 09:40 1
    - Banks do not want to own things -- nm - decline Aug 20, 09:57
  - but then you build in the equivalent of a margin call to the transaction so the lender is never less than fully secured (forget the term) -- nm - mr mooch Aug 20, 09:38

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