Chapter 11
E Pluribus Unum*
Laugh and Learn
C: I was reading about how the owner of Ed made his fortune.
A: Who?
C: You know, Mr. Ed, The Talking Horse, that dumb baby boomer TV show. He was always yelling for his owner, “Wilburrr”.
A: Are you referring to Wilbur Ross, the current Secretary of Commerce?
C: Same guy, right?
A: No, the first guy was an actor; the second is a very successful businessman and, as I said, the current Secretary of Commerce.
C: Well, anyway, apparently Wilbur made his money buying LTV in 2002, a steel company that went bankrupt.
A: Yes. That true, but please be polite and refer to him as Secretary Ross.
C: I’ll try. Can you explain to me how anybody can make money by buying something that’s bankrupt?
A: Okay, well let’s start at the beginning.
C: The Garden of Eden? I’m snoring already.
A: Will you please? We’re going to talk about Chapter 11, Haircuts, Cramdowns, Tariffs, Rollups and Reorganization.
C: Is this what you guys talk about all day? Shoot me now.
A: You know, I don’t have to do this... So, in 2000, LTV Filed for Chapter 11 in the bankruptcy court because it couldn’t pay its bills, including its pension and health care costs for its retirees.
C: Whaddya mean it couldn’t pay its bills? It was making money.
A: It was spending more than it was making.
Then, Secretary Ross decided that he wanted to buy the company and he negotiated with the creditors, primarily the workers who were owed pensions and health care, to take less money than they were owed. This is called a haircut. But if the creditors had refused to take a haircut, the bankruptcy judge could have forced them to take one, which is called a cramdown.
C: Like breaking knee caps! Sign me up.
A: In 2002 Secretary Ross was able to buy LTV out of bankruptcy, changing its name to International Steel Group, or ISG.
C: As in: “I See Green”? Dinero - get it? Ha Ha.
A: You’re spot on. Now get this: about one month after LTV emerged from bankruptcy, President Bush announced the he would impose tariffs of up to 30% on imported steel. Now, imported steel would cost the same as domestic steel, which meant higher steel prices for everyone, which meant ISG could make more money.
C: Must be nice having friends in high places.
A: Then, in 2003 Secretary Ross purchased four other steel companies that were in Chapter 11 and did a rollup, where he reorganized these five companies into one company. In 2004, he sold ISG to ArcelorMittal for $4.5 Billion, earning for himself nearly $300 Million.
C: It took Wilbur two years to make $300 Million? Why so long? What a shnook.
A: As they say, he was lucky…and smart.
C: Hey, I’m gonna be like Wilbur.
A: Uh oh.
C: How much money does the U.S. Government spend?
A: More than it makes. Why?
C: And how much money do we owe?
A: About $20 Trillion, plus future social security and health costs of no less than $46 Trillion.
C: And what’s the interest?
A: Currently, about $250 Billion.
C: I’M GONNA SAVE OUR COUNTRY. The U.S. Government will declare Chapter 11 and go into bankruptcy court.
We’ll do haircuts and cramdowns with our creditors, eliminating all of our current and future expenses.
Then, we’ll do a rollup with some other bankrupt countries, like Venezuela and Greece, and we’ll reorganize.
I’ll buy all our assets, investing $11…
A: Why only $11?
C: Who’s gonna pay more than $11 for negotiating a $67 Trillion cramdown?
Then, we’ll emerge from bankruptcy with lots of money and no debt.
And THEN, I’m going to raise tariffs to 100% on everything imported, which will mean higher prices for everyone, which will mean a lot more money for me.
But, I’m not gonna sell us. I’m gonna keep us and rename us.
A: To what?
C: US Steal.
A: Very catchy.
*Recommended to me by Willburrr.