Trustee Hollinger

Trust is a mother****** loco, ****
And so is temptation
And I don't know what I'ma do
--Snoop

Alarm Bells a-ringing:

Hollinger Inc. says most of special dividend to be transferred to trustee

Canadian Press
Saturday, December 18, 2004
TORONTO (CP) - Hollinger Inc. said Friday that most of the $39.4 million US it will receive as a special dividend from the sale of the Telegraph newspaper group will be transferred to a trustee as collateral for what it owes to secured note holders.

The publicly traded Toronto-based company, which Conrad Black is seeking to take private, said that nearly $37.5 million US of the special dividend will be transferred to the trustee under agreements with the note holders.

Hollinger Inc. said the remaining $1.957 million US that it will receive from the special dividend will be retained by Hollinger Inc. and applied for corporate purposes.

First off: A trustee being involved is not a good sign (duh). In small businesses, this almost always means bankruptcy and result? The shareholders get zip. But it also has some other implications.....

Once a trustee is involved, they become another interested party that is attempting to extract money from the company. The creditors, the shareholders, the customers, the suppliers and the employees/management are all in various stages of attempting to get some resources from the company for the least amount of effort and time at any one moment, and of course adding another competing party to the feeding frenzy means some action like the above--The trustee is making sure they get paid.

The chief problem of trustees is that they are interested in attempting an orderly payoff of the themselves first off, and then less importantly, if anything is leftover, they distribute the remainder to the creditors (usually little, if anything). They will sell any assets of the company they can get ahold of, and paydown their fees first, often at a severe discount (for a speedy payout) and to the total detriment of the other stakeholders. After the fees of the trustee are secured, any time and effort expended is only to the benefit of the other stakeholders-and that only means a transfer of wealth from the trustees to the other stakeholders...and that is not in the trustee's best interest.

Under the law, trustee's are obliged to get top dollar for the assets of the company, but this is simply not true in practice. They are another shark in the water with an insiders' edge on the company ("We will protect from those outside forces" ie: creditors), and a need for speed in terms of securing their priority over the assets.

This is a tough game the trustees and creditors play. Let's hope the shareholders, the guys at the bottom of the heap, realize that they are SOL and leave these fools to their own devices.