Hedges flex their muscle

Hedge funds are flexing their financial muscles, demanding companies that do not file quarterly reports on time to immediately repay all their debts.

Technically, companies do default on their outstanding bonds when they fail to punctually file quarterly reports with the Securities and Exchange Commission. However, investors have traditionally turned a blind eye to the missed deadline, allowing the company time to finish its report.

However, hedge funds -- hungry for profits -- are not being so nice. The widening scandal of companies that have been caught backdating stock option grants to executives is adding tension to the mix, because many firms have had to more closely scrutinize their filings -- causing deadlines to be missed, in some cases -- to ensure compliance.

"Bondholders used to be extremely lazy," Andrew Redleaf, chief executive at Whitebox Advisors LLC, a $2 billion hedge fund, told the Wall Street Journal."Part and parcel of what investors do is assert their rights, whether they're shareholders, bondholders or otherwise."

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