Why financial bankruptcies are a unique animal

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In financial bankruptcies, the value of the assets is normally much greater than the value of the underlying business.

the ranks of dramatic financial bankruptcies — including Lehman Brothers and MF Global — in which customers actually get paid back in full.Such outcomes are more common than you might think, largely because financial bankruptcies are a unique animal where the ultimate losses borne by creditors are rarely a good guide to the magnitude of the damage caused.Financial companies tend to have large balance sheets, filled with assets that can often be hard to value or sell.

By waiting until those assets rise in value and then selling them expertly, the total amount realized can often exceed the value of the liabilities.

 

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