That was my thought. They made a high-risk investment and it failed. I personally don’t think they deserve anything at all in the settlement. If I made a bad investment and a company went bankrupt I wouldn’t get paid ahead of anyone else and I’d likely not get paid at all.
This should be no different.
According to contract law, bondholders should be first in line, whether they made a bad investment or not. Contract law was sacred until Obama over road with the DM and Chrysler deal.
The risk of the investment's default is supposed to be compensated by a high coupon. Investors--even greedy and risky ones--haven't had to take into account an unstable and crony-favoring interpretation of the law. And, they shouldn't have to in a land where the rule of law exists. Well, no more.
Watch where rates go now for municipalities that get into trouble--and those rates will be so high they will accelerate the slide into bankruptcy.