Subsidiary bond/merge cheat

[beuher2000]

Not sure this is known but even with the no exploit script line I can create infinite bonds for my company

1) issue maximun number of bonds
2) open subsidiary with the bond money

repeat 1 & 2 with the latest subsidiary

at the end merge back the subsidiaries and your company inherits all the bonds and thus get infinite cash
can do x10 each round of 1 & 2

[Stylesjl]

This is an interesting exploit, it doesn't allow you free money as you will always still inherit the bond debt no matter how you merge your subsidiaries, but it does allow you to get around the debt limit (i.e you can issue as much debt as you want).

The underlying problem is that when issuing debt it is taking into account the equity of the subsidiary, not the parent company. I think bond/bank loans should account for the total equity of the corporation in total. If the parent company can't afford it then neither should the subsidiary.

[David]

Do you have any suggestions about what game mechanics or rules needed to be changed in order to how to fix this exploit?

[beuher2000]

there are at least 3/4 ways:
1- prevent opening subsidiary if too much debt (accounting for the parent debt)
2- prevent bond issuing if parent company has too much debt (as proposed above 2a ) or if assets are parent money (parent initial cash could be seen as a bond issued by the sub... 2b)
3- prevent merging if sub has too much debt (3a) or before a certain period (x years) 3b


Not sure how it works in real life but you should try to make it close to real life (probably 2nd solution as banks require guarantees and for a sub it would be its parent assets)

Actually I could see solution 2b) as the best one (initial cash is a loan from the parent company) hence net worth of sub is zero at the start and cant issue bonds until it makes profit or 3b is the easiest to implement but could be countered I guess

Asking ChatGPT one fix could be to forbid opening subsidiary below a certain asset to debt ratio! (debt covenants)

[cantdownloadit]

i would go with 2
i cant imagine many people would want buy those bonds

[beuher2000]

I m wondering if you could fix the other exploit with bonds issued on articial stock value
(buy a lot of a company to get inflated price then your assets is inflated and you can issue way more bonds than you should as the stock value is not real)

though it s likely to be another fix: to discount market value for big shares for example or count in the asset the percentage of the net worth of the share of the company