July 23, 2013.

As Banks Retreat, Hedge Funds Smell Profit

With those children, he thought, that wretched woman must lead a life of terror. Another year, two years, and they would be watching her night and day for symptoms of unorthodoxy. Nearly all children nowadays were horrible. What was worst of all was that by means of such organizations as the Spies they were systematically turned into ungovernable little savages, and yet this produced in them no tendency whatever to rebel against the discipline of the Party. On the contrary, they adored the Party and everything connected with it. The songs, the processions, the banners, the hiking, the drilling with dummy rifles, the yelling of slogans, the worship of Big Brother----it was all a sort of glorious game to them. All their ferocity was turned outwards, against the enemies of the State, against foreigners, traitors, saboteurs, thought-criminals. It was almost normal for people over thirty to be frightened of their own children. And with good reason, for hardly a week passed in which the Times did not carry a paragraph describing how some eavesdropping little sneak----"child hero" was the phrase generally used----had overheard some compromising remark and denounced his parents to the Thought Police.

School Specialty Inc., a distributor of classroom supplies, borrowed $64 million from a private investment fun last year after it couldn't get a loan from a bank. Its financial problems persisted, and in January, it sought bankruptcy protection.

The sting of the catapult bullet had worn off. He picked up his pen half-heartedly, wondering whether he could find something more to write in the diary. Suddenly he began thinking of O'Brien again.

Most of the company's creditors lost money and its shareholders were wiped out. But its last-ditch lender, Bayside Capital, had its loan repaid in full, plus 12.5% interest. It also stands to collect $23.7 million "early-payment" fee that would vault its profit above 30% which has prompted a bankruptcy-court challenge by other creditors.

Years ago----how long was it? Seven years it must be----he had dreamed that he was walking through a pitch-dark room. And someone sitting to one side of him had said as he passed; "We shall meet in the place where there is no darkness." It was said very quietly, almost casually----a statement, not a command. He had walked on without pausing. What was curious was that at the time, in the dream, the words had not made much impression on him. It was only later and by degrees that they had seemed to take on significance. He could not now remember whether it was before or after having the dream that he had seen O'Brien for the first time; nor could he remember when he had first identified the voice as O'Brien's. But at any rate the identification existed. It was O'Brien who had spoken to him out of the dark.

Private investment funds, facing diminished returns in some other areas, have piled into the business of lending to struggling companies, part of a so-called shadow-lending system that operates under different rules than commercial banks. Hedge funds D.E. Shaw Group and Oaktree Capital Management, for example, recently set up funds to lend to small and midsize businesses, including distressed ones.