The Return of the Participating Debenture

by Magnus Brorsson

Ivar Kreuger and the Kreuger Group became during the 1920s the symbol for the Swedish dream of success and an international role. Kreuger played a global role in the finance world and did in fact finance several countries against monopoly rights for his match industries. What nobody knew was the dark secrets of the group; the fact that the group was blown up with the help of internal transactions and that the participating debentures were in practice nothing else than junk bonds. The proceeds from the business was not enough to pay dividends but required that new debentures were issued to acquire capital. The crisis became acute in February 1932 when the International Telephone and Telegraph Corporation demanded that the acquisition of the Swedish telephone company LM Ericsson (now Ericsson) should be canceled because of misleading representations. Ivar Kreuger was found dead, presumably by suicide, only a few weeks later. After that there was no rescue; most of