71–80 of 232 posts
Earlier quoted context omitted.
My personal experience with LLC loans and banks is that the bank is using the assets as collateral and me as a backstop.
I thought the whole point of LLC was to limit liability so you wouldn't be liable for debt beyond your paid up capital? Why would you ever sign a personal guarantee?
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A lot of comments praising this summary, but I'll criticize it: it's still too verbose, and misses the point. Meta wants to fund this project, but doesn't want the debt on own its books (because it would impact its vanity AA credit rating). Debt investors are happy to finance a special purpose vehicle guaranteed (in a non debt way) by Meta at a credit rating almost as good as Meta's (say, A). No one is confused this…
Meta is borrowing a whole lot of money and they're lying about it to investors.
remember that time Facebook spent $10s of billions on the metaverse?
Folks in the comments here begging ChatGPT to teach them how to read
The difficulty understanding this piece comes from lack of knowledge about finance and ratings, not from an inability to read. The blog assumes a large amount of financial knowledge which is not common among the HN audience.
1. Facebook creates a shell company.
2. The shell company borrows billions of dollars, and builds a data center.
3. Facebook leases the data center.
4. The fact that it is technically only a four-year lease with only one possible tenant can conveniently be ignored, as Facebook assumes essentially all possible risks. The shell company could only possibly lose money if Facebook itself goes under, so the lenders can treat the loan as just as reliable as Facebook itself.
5. Because Facebook technically only has a four-year lease, it can pretend it doesn't actually control the shell company: after all, it can always just decide not to renew the lease. The fact that is assumes essentially all possible risks can conveniently be ignored, so Facebook can treat it as a separate entity and doesn't have to treat the debt as its own.
So the lenders are happy because there's no real risk to them, and Facebook is happy because they can pretend a $27B loan doesn't exist. It's a win-win, except for the part where they are lying to their shareholders about not taking on a $27B loan.
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Mechanistically, how would the LLC achieve bankruptcy?
you just... file for bankruptcy like any other person or corporation?
I'm asking how you would believe this vehicle would go broke, which is the usual reason to go to bankruptcy.
> This treatment is considered acceptable because the people who decide what is acceptable have accepted it. Wasn't that the root of the 2008 crash? The debt spiral was acceptable because people were making enough money in the present that regulators were powerless to advise against it. In a sane world people often go to jail for decades when doing this at pennies on the dollar.
The 2008 crash was in part caused by inaccurately rating synthetic bundles of subprime mortgage debt as extremely low risk (e.g. AAA). Subprime borrowers had a much higher risk of defaulting than a AAA rating implied. On the other hand, Meta has great creditworthiness. And guarantees this vehicle. So... it's not the same.
Earlier quoted context omitted.
A lot of comments praising this summary, but I'll criticize it: it's still too verbose, and misses the point. Meta wants to fund this project, but doesn't want the debt on own its books (because it would impact its vanity AA credit rating). Debt investors are happy to finance a special purpose vehicle guaranteed (in a non debt way) by Meta at a credit rating almost as good as Meta's (say, A). No one is confused this…
Still too verbose. Here's a TL;DR. Meta is borrowing a whole lot of money and they're lying about it to investors.
Folks in the comments here begging ChatGPT to teach them how to read
It is not the reader's fault if the article is unreadable in the first place. Not to mention that asking help to explain a text is extremely common. I can read English, but I have never read a US supreme court ruling. There are much better ways for me to understand those rulings to me as a non-lawyer.
The most publicly notable cases (on things like abortion, gerrymandering, gun control, etc.) aren’t so tied down in complex precedent or laws the average person is unfamiliar with.
Although, even some of those (like, for me, issues around Native American sovereignty or maritime law) are quite readable as well.
Earlier quoted context omitted.
Still too verbose. Here's a TL;DR. Meta is borrowing a whole lot of money and they're lying about it to investors.
No one is lying or deceived here.