Dangerous Manufactured Defaults May Soon Be A Thing Of The Past

A shady deal in 2017 between Wall Street behemoth Blackstone and Hovnanian Enterprises, a leading homebuilder, has shaken investor confidence in the markets. These “manufactured defaults” occur when an otherwise solvent company deliberately defaults on its debt. Powerful investment firms are making big money by encouraging companies to miss bond payments they could otherwise make. “The practice has eroded market confidence, triggered legal fights and led to scrutiny from regulators,” according to a recent article from Bloomberg News. It’s no wonder investors think they system is rigged! In 2017, one of the largest asset managers in the world, Blackstone’s GSO Capital Partners disclosed that it had taken out insurance on bonds issued by Hovnanian Enterprises Inc., essentially betting that the home builder would default on the debts, according to an article last summer in the Wall Street Journal. Blackstone looked  bad in the transaction,…

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