RIDGEFIELD, Conn., July 1, 2015 /PRNewswire/ -- Southridge, a diversified financial holding company specializing in direct investment and advisory services to small and middle market companies, has released comments on Greece's debt crisis which resulted in stock prices falling around the world this week.
Stephen Hicks, Chairman and CEO of Southridge, says, "The situation in Greece and closer to home in Puerto Rico right now remind us that what's past is prologue. After joining the European Union, Greece did not abide by the requisite fiscal constraints and leveraged itself onto the precipice of financial ruin. Greece has been unwilling to make the sacrifices which their partners require and missed their required debt payment to the EU on Tuesday. Meanwhile, Puerto Rico currently has a debt 15 times greater than the average state in the US as a percentage of its economic output. Authorities in Puerto Rico announced that they simply cannot pay their debt."
"Hedge funds have been busy buying and selling Greek and Puerto Rican assets and debt, and placing their bets on the ultimate resolution of these conflicts. However, there may not be timely resolutions to these issues."
In the worst case, Hicks suggests that hedge funds invested in the Greek economy can expect that Greece will be forced to exit from the EU and they will need additional outside financing which will be under onerous terms and will eliminate all or most of the current debt holders' investments. In the best case, there will be a bailout package and Greece will remain in the EU. As for Puerto Rican debt holders, there is no guarantee by other investors and the United States government will likely not intervene.
"What can we learn from this? For starters, moral hazard almost always leads to unintended consequences, and overreaction. Secondly, hedge funds, will always try to exploit situations like these, many times at their own expense," Hicks adds.
Southridge is a diversified financial holding company specializing in direct investment and advisory services to small and middle market companies. Since 1996 the structured finance team has made direct investment of over $1.7b into growth companies globally. Our expertise lies in our ability to customize a financing plan for the prospective client and then execute on that plan without fail. For more information, visit: www.southridge.com
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