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Bell, Nortel, et al

Interesting news today that brings me back to the dot com era. The courts will decide whether BCE bondholders should be compensated for the sale of the company to Ontario Teachers and private equity firms.

Even though the board is somewhat different today at Bell than it was during the dot com era, one only has to look at how they wrote off their investments in Bell Canada International and Teleglobe back in the earlier part of the decade. Bell wrote off their investments along with the implied guarantee on the bonds of those subsidiaries. Bond investors got pennies on the dollar back then and left many with a sour taste for anything to do with Bell.

Looking at Nortel, formerly a BCE subsidiary, the company was not charged but former executives were charged with putting out financial statements that werent quite accurate allowing them to collect millions in bonuses while individual investors were left with a fraction of their underlying investment.

All this which leads up to the companies that provide credit ratings such as Standard & Poors. The whole ratings game is coming under scrutiny as structured products may get a whole new set of ratings so they arent confused with traditional fixed income investments. Sub-prime mortgages, commercial paper along with other structured investments will garner greater scrutiny from regulators and credit rating agencies in the months to come.




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