As I wrote in another thread, in the current climate, you can’t assume that a bank cutting a line of credit is acting on the basis of a sound assessment of the company’s situation. Banks have been cutting credit lines senselessly for some time, putting otherwise viable companies in very difficult situations. Given, as several posters mentioned, that said banks have received all sorts of bailouts and guarantees, in particular with the expectation that this could prevent a complete credit crunch, it’s not at all unreasonable to second guess their decisions when they refuse to extend a line of credit.
I’ve zero clue about the situation of this particular company, but you can’t just say “companies must be allowed to fail” because currently many companies are failing or on the verge of failure (or simply unable to expand though they would have the opportunity to do so) not because they can’t compete, can’t find clients, etc…but rather because banks are suddenly pulling the credit carpet from under their feet. This is not a good thing, regardless of your political inclination or economical analysis.
Maybe this particular company is indeed doomed, and the bank’s decision was very sensible, maybe the company isn’t doomed and is just trying to get off its obligations and lay the responsibility at the bank’s feet, but statements to the effect that a bank’s unreasonable policy is causing a company to fail and/or to be unable to meet its obligations are unfortunately currently quite credible. You shouldn’t assume a priori that it’s just the free market in action, culling the herd by removing the weak and the diseased.
You’re NOT sorry for the workers, it’s obvious that you’re not, so don’t say you’re sorry for them. Argue your economic theory as you like, but don’t pretend to sympathy you clearly do not possess.
All very good arguments that Bank of America can make as well.
Which is why you should never own a business. Just because B of A can afford it doesn’t mean they should have to or that they have any responsibility whatsoever to do so.
:rolleyes:Whatever you say, Kreskin. Fact is, I AM sorry for them. THEY did NOTHING wrong. The company owes them money. I just don’t think that any of us have a right to expect a third party to come in and save the day, whether it be you, me, Bill Gates, or B of A.
I may be incorrect, here, but I was under the impression that the bank was seizeing the factory’s assets to pay off the debts the factory owed to the bank, and the purpose of the strike was to prevent that from happening. Am I totally off-base in that? If the bank is liquidating the factory’s assets, it doesn’t sound unreasonable for the bank to set aside some of those profits to clear the factory’s payroll obligations.
It’s not like BoA pulled the line of credit because they wanted to be mean. If I recall correctly, Republic posted significant losses in '06, '07, and presumably were well on their way to do so in '08. That’s three years of unprofitably, and potentially more. In other words, since Republic is losing money, their ability to pay off loans is questionable at best. Since BoA isn’t in the business of giving money away, they decided not to loan Republic any more money.
It’s not BoA that caused Republic to not be able to pay their employees. It’s (probably) gross mismanagement by Republic that caused them to not be able to pay their employees. BoA is an innocent bystander in this situation.
Unless I am mistaken, the best BoA is going to be able to do in this situation is to recoup their loan through the sale of collateral. However, it’s almost a certainty that the value of the assets BoA ends up selling will be significantly less than the loans made, resulting in a loss for BoA.
The point is that the recent government bailout, was specifically to stop this kind of thing from happening (i.e. otherwise healthy companies failing from lack of credit).
In other words, they owed money to their employees, and to the bank, right? I don’t necessarily see the problem in making sure the employees get paid off before the bank does. Part of the business of lending money is the risk that you won’t get all the money back.
I believe the debt to the workers (missed payroll) takes precedence over other creditors. It might make sense in that case for the bank to extend enough cash to Republic simply to avoid having an immediate auction, which given the current market isn’t likely to be very profitable.
It was in the NY Times, and it came from a PR company hired by Republic to talk to the press. However the articles today still have them not saying anything.
From what I’ve read, secured debt would take precedence over unsecured debt. In other words, if Republic put up their factory as collateral for a BoA loan, then BoA is entitled to the proceeds of the liquidation of that factory up to the loan amount. Workers have unsecured debt against the company, which is lower on the precedence level than secured debt. In general workers are pretty high up on the priority list of unsecured debt, but I can’t speak to particulars. I’m guessing, however, that there is little hope of these workers getting their cash through the liquidation of Republic’s assets.
I’d agree with this, except that the bank had already turned off the faucet. If the company was so poorly run that they didn’t see to it that their employees would be taken care of before the end, I don’t see why the bank has to step back in and make, what is in essence, a donation.
Yeah, I couldn’t find their statement either. Thanks. From that same article:
It appears that the management, some combination of old owners and new, are trying to get away with the workers holding the bag. I’d go after Gillman. Get the money from him and/or the old owners.
The reason BOA extended credit is Blago cut off all business with BOA until they extended credit to the company. One reason the state cares about this and is putting pressure on BOA is that they are not liable for unemployment insurance for the period covered by severance pay. The workers are asking for what is rightfully theirs under federal and Illinois law.
You’re probably right. And if you ask me, that’s just blackmail. Jesse would be proud. B of A has no legal or moral obligation to make things better. The state should look at the sale of the company. It appears they were gaming the system, leaving someone else holding the bag.
The first $10,000 (per employee) of unpaid wages is a priority claim. Only child support, estate administration expenses, and certain unsecured postpetition claims lie ahead of unpaid wage claims in the priority order.
That doesn’t mean that there aren’t secured claims that would leave no residual assets, of course.
I just saying, if the bank is seizing the factory’s assets, I don’t see a moral or ethical problem with the state stepping in and saying, “The employees get theirs before you get yours.” Which seems to be effectively what’s happening here: the banks just paying off the workers before they sell the assets, instead of after. The only way I see this as being unfair is if the bank can’t make enough from the assets to cover the cost of paying out the employee’s wages, which as far as I know, is not the case.
I haven’t followed all the details in this situation, but I think part of the perception at least is that BoA is somehow complicit in some sort of scheme to assist Republic’s owners in defrauding Republic’s employees. I’ve also seen some things that seem to suggest that there’s some sort of structured dealing being used to get around NLRA prohibitions on closing a plant to avoid a CBA, although it’s been a long time since I looked at the NLRA. There’s more going on here than just an ordinary bankruptcy and plant closing, and I have a sneaking suspicion that BoA’s role in this is less than fully innocent.
It’s morally wrong because it changes the basis of the agreement that BoA made with Republic. BoA loaned that money on the basis of getting collateral, and would likely have not made the loan otherwise.