Long or Short Capital

When you have nothing, you still have something. At least that’s what Beelzebub likes to tell the destitute before he makes then john hancock some contract he had Skadden draft up. It’s also what a microloan business in Latvia (note that that this country is the home of Dr. Doom) is telling its customers. No collateral, no problem, we’ll throw up a lien on your immortal soul:

Clients have to sign a contract, with the words “Agreement” in bold letters at the top. The client agrees to the collateral, “that is, my immortal soul.”

Mirosiichenko said his company would not employ debt collectors to get its money back if people refused to repay, and promised no physical violence. Signatories only have to give their first name and do not show any documents.

“If they don’t give it back, what can you do? They won’t have a soul, that’s all,” he told Reuters in a basement office, with one desk, a computer and three chairs.

Wearing sunglasses, a black suit and a white shirt with the words “Kontora” (office) emblazoned on it, he reaches into his pocket and lays out a sheaf of notes on the table to show that the business is serious and not a joke.

This isn’t entirely new. Most of the top of the market LBOs included liens on the souls of KKR, TPG, Cerberus et private equity alia. Unfortunately as many of those very same deals head to filings and out-of-court restructurings, it’s become apparent how lacking in value those very same private equity souls are. Apparently most have preexisting super-priority liens already in place that were used in deals with the devil.

Recommendation: If you’ve ever owned a soul, like I have, then you know it doesn’t make for very strong collateral. For a typical human the ability to seize the collateral is metaphysically impossible, and the legal process of enforcing your rights under the standard Soul Loan Agreement is difficult and arcane. You will likely be forced to sell your claim on the soul to a capable third party distressed shop like the aforementioned Beelzebub or Mictlantecuhtli or whomever at 15 cents on the dollar or less. Now if you already have a preexisting relationship with such a shop to source souls for them, then it makes sense. According to their latest Q, Goldman Sachs’ (NYSE: GS) most lucrative area was their soul trading and acquisition segment.

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