By: Cydney Posner

There is an article in the WSJ which discusses one of the many developments arising out of the backdating scandal. Because of the length of the investigations into option dating practices, many companies have been late in filing their 34 Act reports or have been unable to file altogether.   The article reports that, in contrast to the lax attitude that many bondholders adopted in the past to that type of "technical" default, many hedge funds are declaring, or threatening to declare, delinquent filers to be in default and to accelerate the entire underlying debt obligation.  Apparently, hedge funds are becoming the dominant players in distressed-debt markets.  The article reports that, during the past 18 months, the bonds of at least 25 companies were accelerated in this way or the companies were forced to pay concessions involving multimillion-dollar fees to bondholders, according to research by Merrill Lynch.

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