Chris Smith, a former employee of Idearc, opines in the Locals Only column at SEL, that Verizon did some very questionable things when it spun off Idearc:
After the spinoff of Idearc, Verizon turned around and resold the debt instruments to other companies. The loan agreements which required Idearc to make simply whopping payments over time, were now bought by other companies and Verizon was no longer attached. Now, this may be or may have been “Business As Usual” for a splitting-off of one company from another, but the sequence rather smacks of something similar to Enron or other unsavory deals where one knowingly sells off debt-laden assets at a hyper-inflated rate, only to leave the new owner holding the bag on a worthless item. It’s these creditors which were passed the hot potato of Idearc, and they’re now very interested in moving Idearc along to be “reorganized”.
“Reorganization” sounds very positive, and sounds very responsible, but it’s essentially a euphemism for taking the company away from the stockholders in return for forgiveness of debts which Idearc could never pay. Stockholders will be left holding worthless paper in place of their investments, most likely. The debt holders end up holding the company, paid for at the expense of the investors.
The sequence smacks of a shell game, and many small stockholders are left with nothing at the end of it, and rather confused by what happened.
Read the whole article.