The Vulture Investors

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Just as night follows day, a fall inevitably trails a stock market rise. As the Internet share frenzy reaches its nadir and bankruptcies loom, the vultures start circling. Hilary Rosenberg's delightful Vulture Investors details the work of investors who pick through the carcasses of busted companies. She describes in colourful detail the efforts of Michael Price buying defaulted bonds of Storage Technology Corporation in the mid-1980s. We learn about the early training of junk bond-corporate raider Michael Milken, trading in bankrupt and near-bankrupt companies. This is an updated edition of a book that Rosenberg first published in 1992. She worked for Institutional Investor, the American Vogue magazine for corporate financiers. She skilfully imbues what is basically a dull and sad process into tales of pitched battles between financiers and investors, commenting, "Vultures are a rare breed of investor. They are willing to fly headlong against a blizzard of prevailing opinion, betting that a company on its knees will once again stand up and resume walking. In some cases, they bet that the company will be worth much more dead than alive, and that they will profit when it is sold off in pieces." Vulture Investors describes many bankruptcies and the processes by which investors have profited. We learn about the saga of the Public Service Company of New Hampshire, which had unfortunately decided to build the Seabrook Nuclear just as the tide of public opinion was turning in the early 1980s. Drexel Burnham, the junk-bond spet, had been called in to raise $150 million in capital to keep the utility ticking along. Rosenberg says that "vulture investor Marty Whitman had concluded that the deal was not viable. It was a ridiculous attempt by Drexel to stave off the inevitable. The $150 million offering, said the veteran vulture in his gritty voice, "was like spitting in the ocean. When the placement memo landed on his desk, it was like a green light flashing, 'Go invest'". Readers will learn why. The book does not offer in as to where the next arena for vulture investing will occur, and is more useful as an interesting read about characters in the US, and the tricks, techniques and negotiating tactics that worked well in the last decade, but nevertheless, for that alone, it is highly recommended. --Bruce McWilliams