According to an article I read in the Chicago Tribune, hedge funds have found a new trick - shaking down companies that are late with filing their earnings reports.
These days, because of Sabranes-Oxley and the recent SEC investigations into back-dated options, a lot more companies are filing late.
In many cases, the bonds of these companies have covenants, buried in the fine print, which state that a bond-holder can technically demand payment if the filing is late.
The hedge funds pore through the companies' bond prospectuses, find these loopholes, buy the companies' bonds, and then try to enforce the clauses.
Since the companies can't easily raise new money (because they haven't filed an earnings report) to pay off the bonds, they might agree to a "special fee" to the bond-holders to not enforce the clauses.
You have to admire hedge funds - they are willing to read thru pages and pages of boring legalese, just to find an edge to agressively exploit.
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