Colonel Electric, before it was demoted, used to have really great assets. A jet engine division. All kinds of finance. Real estate. It even owned NBC. But then everything kind of imploded and the stock price sank and it's likely that ASSET STRIPPERS are looking hungrily, hoping to buy the whole company for a song. Once they get it, the goal will be to auction off whatever key parts were left of the once-great conglomerate.
That process is called asset stripping (which is very different from what the process would be if the same term had the "et" removed).
For a more street-level example, think of buying a rundown junker of a car and selling it for parts. The amount you can get from the bits and pieces (the tires, the engine, even the airbags) is more than the whole car is worth...it's just a matter of putting in the work to strip it down.
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Finance: What is STRIPS?2 Views
Finance allah shmoop What are strips Well they're just government
back zero coupon bonds They pay no interest along the
way And then at the very end after being sold
at a meaningful discount to par well they pay far
and everyone goes away Happy ish All right well strips
stands for separate trading Registered interest principle of securities strips
Yeah and not nearly as exciting as you were hoping
right Well strips became a thing in nineteen eighty five
as the government zero coupon vehicle of choice Replacing older
forms of money raising The basic idea was to feed
and ever more complex hunger among investors wanting different flavors
of debt food and stripping principle in various forms Help
to at least partially feed that beast well in this
case the coupons can be stripped from the principle So
in the case of say fifteen year paper there are
thirty one elements of payment or thirty one payments to
be made where thirty of them are coupons or semi
annual interest payments And those can be packaged as one
suite of a product And then there is a final
payment of principle That's the thirty first flavor there you
know like baskin robbins you know investors can buy them
separately or combined as it suits their needs And you
can imagine having just bought a building which carries a
tax deductible interest costs via debt procured to buy it
That interest cost to the company's in one hundred grand
a month Well in order to defeat ease that interest
costs five dollar word there The company might also by
strips where they're just buying the coupons from it for
an offering that pace a four hundred grand twice a
year in stripped coupons Well that way eight hundred thousand
boxes with one point two million owed in those monthly
pay payments on the building are defused and the company
only has to stress about the remaining four hundred grand
to cover their brand spanking new building interest costs Well
at the other end of the liquidity spectrum a company
might not need any cash for fifteen years and they're
happy just getting very safe Us government backed interest in
buying the principal at a discount and then fifteen years
later cashing in getting the cash getting back to par
Well either way it's Nice to have a little bit
Of cash left at the end of the day Especially
if you're planning to stop by the zero coupon bondage
parlor That's A different kind of stripping But we didn't
go there because we're just doing fifty shades of shmoop 00:02:20.83 --> [endTime] here A while
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