Bloomberg writes "FDIC Proposal Tells U.S. Bondholders to 'Get in Line'". It says, "The Federal Deposit Insurance Corp. may start favoring providers of short-term financing over long-term bondholders when it winds down a systemically important financial institution, CreditSights Ltd. said. The regulator is considering paying commercial paper, bank lines of credit and other short-term obligations first in resolving the credit obligations of troubled companies. Holders of senior unsecured bonds with a maturity date of more than one year 'would be expected to 'get in line' along with other creditors,' CreditSights analysts David Hendler and Baylor Lancaster wrote in a report. The FDIC released a document yesterday that outlined how it's considering treating creditor claims when it steps in as receiver of a troubled firm. The Dodd-Frank Wall Street Reform and Consumer Protection Act granted the FDIC authority to take control of bankrupt or insolvent companies that threaten U.S. financial stability.... Favoring short-term creditors may encourage investors to continue to roll over obligations that allow a company to continue operating, the CreditSights analysts said."
