I had mentioned Chrysler’s bankruptcy previously. What was being reported, whereby the unsecured creditors were making out much better than the secured creditors, simply didn’t strike me as making sense. I thought the secured creditors would simply say no, and force the issue in court. Which appears to be what they are doing. The only “winners” if you can call them that, are the unions, who, as unsecured creditors, wound up with 55% of the company.
Well, sort of.
Been hearing this all weekend long from multiple sources. Just appeared on Drudge, don’t know if this means anything, but it appears to possibly be real.
From ABC news (not that they are the reliable, but they are reporting it):
Now this seems weak, though the indicated fund did pull out of a lawsuit.
But this wasn’t the only information out there. I found a link today with more details on what the requirements were
Notice the use of the 363 section provisions. But more to the point, notice the use of the “golden rule” well known to startup folks (he with the gold sets the rules), and the implied threat that the treasury will be the lender of last resort, and make the decision as to whether or not to continue funding Chrysler.
This is a pretty big lever, but as the secured creditors are, by law, required to be first in line for receiving value from assets, this is the nature of the conflict. The government wants VEBA and others to come first. Arguably, and this point has been raised at multiple locations, to reward a political constituency.
Of course, the secured creditors have levers of their own, and no political constituency to worry about. Just shareholders whom are being asked to take a very significant hair cut. I expect that they will give the other parties a chance to find a reasonable position, rather than the one apparently staked out.
Of course, in this day and age, it is apparently fair game to go after banks, funds, CEOs, investors.
Unfortunately, the people doing the lending to Chrysler, were investing your 401k money. And your pension money. And …
Well, you get the idea.
This isn’t going to be pretty.