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Automotive News & Views Can Chrysler Turn It Around in Bankruptcy?
464 messages, Last post on Oct 02, 2009 at 2:05 PM
You are in the Automotive News & Views Forum. Your Hosts are steve_ & claires
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Replying to: kernick (Jun 09, 2009 8:16 am) As for the Chrysler (and soon GM) issue it seems to boil down to "the greater good" versus "bondholder's rights". Either way probably has complications. Finding against the bondholders will have costs down the road such as potentially higher interest rates due to increased debt holder risks. However, going for the current bondholders may likely really mean Chapter 7 liquidation rather than Chapter 11 reorganization (look at the balance sheets!) and a large hit to jobs and the US economy. I don't think the decision should be made solely on narrow legal interpretations for either side because of the potential ramifications. I don't know that there is a clearly "correct" answer here, and whatever happens we as a nation need to put our disagreements and preferences aside when the decsion is finally made (and be glad we didn't have to be the one deciding this tough issue!) and start working together to turn things around. My experience over the years has been that hardliners on any side of an issue seldom resolve anything, it is the moderates who have to step in and be practical to get anything actually done. |
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Replying to: bpizzuti (Jun 09, 2009 8:18 am) I think the investment manager for the Indiana pension fund knew exactly what he was doing. He had no business investing these retirement funds in junk bonds. You do not invest retirement funds in companies with "B-" rating and in an industry that was on "life support". This whole soap opera reminds me of the guy who gets a "tip" about a company and buys tons of stock looking for a quick profit. And then gets upset when the scenario doesn't go his way and he is left with worthless stock. If my money was tied in these bonds, I would be furious at the fund manager for buying junk bonds.
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Replying to: berri (Jun 09, 2009 8:42 am)  Well said. Easy for us to debate this issue. Kind of fun in a sadistic way but very educational. Learning a lot form everyone. |
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Replying to: berri (Jun 09, 2009 8:42 am) Yeah, except you've seen how the hardliners treat moderates these days, right?  Anyway, this whole big mess is the result, not the problem. This is what happens when you start getting into bailing out private companies with few to no preconditions. And even if there are some (like seniority of debt) they get argued over. I love the seniority of debt bit...bondholders want more for their Chrysler bonds, so they figure they can tweak the rules and lobby for a taxpayer bailout so there's more assets in the company to collect. Government is smart enough to see this coming (though it's probably more like dumb luck) and decides to tweak the rules to make sure that government debt is senior and the bondholders can't tweak the rules to get at the taxpayer dollars. Bondholders hate this, so they try to tweak the courts, then government tweaks the BK process, tweak tweak tweak.. See where all the rule tweaking gets us? Into a deep disgusting mess. |
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Replying to: dtownfb (Jun 09, 2009 8:53 am) The retirees will next get to sue either the investment company (if Indiana hires outsiders to manage the fund; otherwise, maybe they'll be able to sue the state). Or they'll sue banks doing the underwriting for the Chrysler bonds. That's what they did with Worldcom. (Basex.com)
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Replying to: steve_ (Jun 09, 2009 9:29 am)
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Replying to: dtownfb (Jun 09, 2009 9:38 am) I think the next round of suits you see will be against Moodys and the other rating services. Follow the money.
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Replying to: steve_ (Jun 09, 2009 9:59 am) The unfortunate thing is that while we're all discussing bondholders, liquidation, debt seniority, and credit ratings, there's a whole bunch of people going out of work, and my teammate at work can't get any love on the Chrysler Care contract he paid for when he bought his car (ball joint went while he was doing 50...SKREEEEE!!!).
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Replying to: bpizzuti (Jun 09, 2009 10:07 am) As I discovered a few months ago, the rating services such as Moody's are PAID by the company they are rating! Moody's is not paid by the government or charity. So there might be a conflict of interest there. Follow the money.
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Replying to: kernick (Jun 09, 2009 11:09 am) Ummm...might, yeah. Kinda like auditors being paid by the firms they audit. Wasn't there some big news about that in recent years?
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