The Sunday front-page headline for Nikkei reads “[General] Security for Electricity Bonds to Be Abolished.”
Wait, I missed that one. I didn’t realize that the holders of uncollateralized bonds that the regional electric power monopolies (EPCOs) issued had priority over general creditors. And by general creditors, I mean the evacuees, businesses, and other people collectively claiming trillions of yen in damages against TEPCO. In other words, once the legal bankruptcy (as broadly defined) started, it would have been very difficult to make bondholders take a haircut. Add to this the plausible argument that the TEPCO pensioners also had a significant claim for priority (if you’re a lawyer and can read Japanese, you’ll want to read this document as a starting point for this discussion; thank God I don’t have to), and there’s a good chance that the main stakeholders as well as other priority creditors would have left little in TEPCO coffers for the victims of the nuclear disaster to pick over. The article also raises the need to level the playing field for IPPs in raising long-term funds through bond issues.
I expect it to become law, since it makes so much sense. Until it happens, though, I’ll be careful the next time an EPCO comes asking for a loan.