Sentinel trustee blames collapse on excessive leverage: 700m loans

A

ASusilovic

From ChicagoBusiness.com: Sentinel Management Group Inc. imploded because of over-borrowing, unconventional accounting and a compensation structure that encouraged its head trader to make risky trades that backfired as credit markets tightened, Sentinel’s bankruptcy trustee said Monday. The statements by trustee Fred Grede were the first to lay out what happened at the Northbrook cash-management business in the days leading up to its Aug. 13 bankruptcy filing. Regulators have said they thought there was as much as $500 million in securities missing from Sentinel’s coffers. Not so, the trustee said......At its height, Sentinel had about $700 million in loans and had borrowed against $4 billion in securities, Mr. Grede said. “All of this for a company that maybe, maybe had $3 million in capital,” he said.

http://chicagobusiness.com/cgi-bin/news.pl?id=26469&bt=saphir&arc=n&searchType=all&seenIt=1

Hmmm....leverage...does it mean if you are in trouble => double ?!! :confused:
 
I would have liked to have been their head trader with that $4B and 1333:1 leverage.

And if it doesn't work out, bail me out. We got connections in powerful places.
 
The head trader apparently was a large reason for the downfall...

“He began to buy riskier securities, more high-yield securities, as a result of trying to improve his compensation,” Mr. Grede said."
 
Quote from agent64:

The head trader apparently was a large reason for the downfall...

“He began to buy riskier securities, more high-yield securities, as a result of trying to improve his compensation,” Mr. Grede said."
More...

what a shock, apparently Grede was introduced to human nature recently
 
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