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Subject:  Re: ets payphones Date:  11/1/2000  10:40 AM
Author:  pauleckler Number:  25887 of 88766

Chapter 11 usually means the company was unable to pay interest on its bonds on time or was unable to meet requirements of its loan covenants. Therefore, these creditors have forced it into bankruptcy court to sort out what it owes and how to pay off everyone. It may also be that a key creditor was about to seize key assets that would have prevented the company's continued operation. So Chap 11 protects the company from the seizure for now.

The future for your friend's investment depends on the "class" of what is owned. If common stock, she may get something back when the company is reorganized or sold, but the odds are against it. Chapt 11 is not always disaster, but usually it is. She may get nothing. Meanwhile, it will probably take years for the issue to be resolved--unless a buyer for the company is found sooner.

I recall discussing the risks of Payphone on this board a few years ago. We are now discussing the downside of what can happen when one of these high yield investments goes bad.

Best of luck to you and your friend.

People who consider high yield investments to increase payout in retirement should be especially aware of how bad it can be.

I'm sorry if this advice is painful, but for others thinking about it, high yield investments require close monitoring. If the company appears not to be succeeding, you are usually best off to sell and take your losses before they get to Chapt 11. Once they get to Chap 11, you can usually still sell the shares, but their value then is often very low.
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