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Missing the shower curtain at Tyco…

images3.jpegGee, I miss Dennis Kozlowski’s $6000 shower curtain (pictured here). Let’s face it, the former Tyco CEO’s extravagant misbehavior made for entertaining reading.

Although I can’t say the same for the 10-K that Tyco International (TYC) filed yesterday, I was intrigued by the company’s update on some recent litigation. Back in June, Bank of New York (BONY) – in its role as trustee for holders of Tyco investment grade debt – sued Tyco for $4 billion dollars, saying the firm’s recent spin-off of its healthcare and electronics businesses violated the terms of the bonds. (The suit first showed up in Tyco’s third quarter 10-Q, filed in August.) Despite the big numbers involved and the fact that, according to this Reuters story, the lawsuit raises issues of major importance to the credit markets, this event got far less publicity than the shower curtain.

The 10-K contains the news that on November 8, BONY told Tyco the debt is in default. If BONY gets its way, the bonds could become payable (after a 90-day cure period), and most of the company’s other lenders could join the fun and demand that Tyco pay them back as well.

Tyco will be contesting BONY’s actions, but it has lined up $4 billion in credit just in case it actually has to pay off the bondholders. The company describes these happenings in an odd way, garbling verb tenses so it’s hard to get a sense of how it all went down. But it’s clear they only got the credit fully in place yesterday, just in time for the 10-K filing. Sounds like a tense time for Tyco management, not nearly as much fun as the Dennis days.

(Btw, Kozlowski’s most recent appeal was denied just a couple of weeks ago.)