Wednesday, July 6, 2016

Exclusive: Hedge Funds Will Earn 12% on Some Illinois State Short Term Debt (At a time when most short-term rates are under 1%) has learned that the state of Illinois, which is a financial wreck, is slow-paying some of its receivables.

The firms holding the receivables, in need of operating cash flow, have started to sell-off the receivables to vulture hedge funds, who are willingly picking up the paper.

Here's the kicker, the receivables contain clauses that if there is a delay in payment of receivables beyond the scheduled payment date, the interest rate on the receivables jumps to 1% per month.

The vulture funds are fully confident that they will eventually get paid and are more than happy to patiently wait at a 12% annual rate when the current rate on 90-day Treasury Bill is only 0.27%.