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This might be the first time an explicit ChatGPT response survived being the top comment I personally think it’s a great response and makes it clearer what’s happening Times are changing quickly!
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Credit report shows Meta keeping $27B off its books through advanced geometry
81–90 of 232 posts
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#82Earlier quoted context omitted.
you just... file for bankruptcy like any other person or corporation?
Yeah but when you come to bankruptcy court with significantly more assets than debt, they aren't going to let you sell the business for pennies. I'm asking how you would believe this vehicle would go broke, which is the usual reason to go to bankruptcy.
Corporate bankruptcy happens for a lot of reasons other than being "broke". Chapter 11 is a court-supervised way of restructuring your debt. This has a lot of utility in many situations other than not being able to pay.
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#83Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#84Earlier 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…
So… ‘vanity’ ratings… what’s the point of them then.
I think "vanity" is the wrong term because their existing credit rating, which they attempt to preserve, impacts all other borrowing (and possibly other agreements and finance vehicles, etc.) that they undertake.
So it's probably valuable to retain that credit rating.
The real issue here is how simple it is to game the rating agency in this way and how the market allows Meta to "launder" this activity through the ratings agency.
This is, in fact, a fairly close analogue to the housing crisis and the ratings laundering that was done with the CDOs[1]. The difference is, instead of drilling down to thousands of mortgages - each with different characteristics - you really just drill down to Meta ... which might not be too risky ...
[1] https://en.wikipedia.org/wiki/Collateralized_debt_obligation
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#85Earlier quoted context omitted.
So… ‘vanity’ ratings… what’s the point of them then.
I think "vanity" is the wrong term because their existing credit rating, which they attempt to preserve, impacts all other borrowing (and possibly other agreements and finance vehicles, etc.) that they undertake. So it's probably valuable to retain that credit rating. The real issue here is how simple it is to game the rating agency in this way and how the market allows Meta to "launder" this activity through the rat…
Agreed. I know very little about financing but I’d bet if their rating fell that would trigger some debt repayment clause and the house of financial cards might wobble or fall.
…someone needs to shake the tree and see what falls out, like Peter Thiel did for SVB.
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#86Earlier quoted context omitted.
No one is lying or deceived here.
Ehh, tell me the credit ratings assigned by rating agencies to mortgage backed securities circa 2005-2007. Its an ecosystem with misaligned incentives, and some cohort of investor will be left holding the bag. Big Tech, investment banks, and ratings agencies will get off with no consequences when this Jenga-esq capital apparatus eventually collapses.
I don't see what's Jenga-esque about this capital structure. You've got some AA- bonds issued directly by Meta having to do with their core business, and some A+ bonds issued by different entities to fund their riskier and more speculative datacenter construction. If anything, wouldn't it be harder to track the risk if both these bonds were stuffed into the same bucket?
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#87Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#88Folks in the comments here begging ChatGPT to teach them how to read
This article is poorly written. It’s so desperate to be clever and edgy that it’s hard to get the facts out of it. ChatGPT isn’t really a solution because the source is both low quality and has questionable motives. Going to any of the other good articles on the subject that have been linked in this comment section is much better.
It's well written for its target audience, people who are used to reading financial analyses.
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#89Earlier quoted context omitted.
No one is lying or deceived here.
Ehh, tell me the credit ratings assigned by rating agencies to mortgage backed securities circa 2005-2007. Its an ecosystem with misaligned incentives, and some cohort of investor will be left holding the bag. Big Tech, investment banks, and ratings agencies will get off with no consequences when this Jenga-esq capital apparatus eventually collapses.
A nice article on the underlying systemic causes of the crash:
https://archive.ph/2015.11.08-145615/http://www.wired.com/20...
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#90Earlier quoted context omitted.
Yeah but when you come to bankruptcy court with significantly more assets than debt, they aren't going to let you sell the business for pennies. I'm asking how you would believe this vehicle would go broke, which is the usual reason to go to bankruptcy.
Corporate bankruptcy happens for a lot of reasons other than being "broke". Chapter 11 is a court-supervised way of restructuring your debt. This has a lot of utility in many situations other than not being able to pay.
It'll go before a judge and creditors would be able to object, so if it's just a ploy to get rid of debt you can be certain it'd be contested.