Corporate Governance is Dead
Because of the new taxation rules on dividends, the company's board is essentially distributing $4.25 in after tax value ($5 x .85) to themselves (and to other shareholders) at the expense of the bondholders. Normally bondholders in bankruptcy would have a superior claim over equity shareholders to the assets of the company. This is not the case if the shareholders vote to distribute those assets before bankruptcy.
Maybe the company won't go bankrupt. Maybe there is some good economic reason to this transaction and I am all wet. But if I were a bondholder, I would be getting a very good lawyer right now.
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