[updated] see at bottom:
Chrysler is an HPC user. I am a Chrysler customer. We have 2 Jeep Grand Cherokees. Words like “cold dead fingers” come to mind when I think about giving them up. Well, ok .. on the way in to the lab this morning, my interior roof is starting to leak … 13 year old Jeep.
Chrysler’s bankruptcy was engineered. Not well engineered, just engineered. In the process of setting it up, you saw political patronage completely derail legal rights, specifically senior versus junior creditors.
Now, some of the senior creditors are going to have their day in court. Had this been well engineered, this step wouldn’t be needed. Unfortunately, the Obama administration paid a political debt using a bankruptcy proceeding. And that sort of got in the way of proper bankruptcy ordering. Which is a shame.
Because Fiat can pull out before 15-June if it wishes, with no penalty. That’s 7 days from now.
And if this doesn’t go through, it won’t be a chapter 11 that gets executed. It will be a chapter 7.
I am hoping … that the Obama administration is paying careful attention to this. And making sure GMs process is well engineered, and not a political payout (as it appears to be now).
This isn’t pretty. I am hoping that it doesn’t get ugly. Blaming the people who lent the money in good faith, and who own senior debt, for protesting when their rights were run over roughshod … is exactly what I expect the administration and its propaganda machine to do. This won’t help solve the issue, may prevent a solution. But the people protesting have two things on their side which the administration doesn’t have. First, they are right. Second, they have many years of case law behind them.
The problem is that the administration did run roughshod over the senior creditors. And I am not convinced it is fixable in 7 days or less. Maybe Fiat will stick it out. Maybe the court will lift the stay and allow this to go through.
It doesn’t take a genius to figure out that, if the latter occurs, large secured debt as a market (e.g. large business credit) will be effectively dead. Think about it. You secure your capital loan against company assets. Time honored and well defined legal process. Your customer hits a bad spell and declares chapter 11. Then the government intervenes and effectively wipes out your senior status (e.g. one of the first in line to get paid back), as they have a constituency that has a junior creditor status as an unsecured lender. Why would you even consider taking the risk of lending to such organizations?
You wouldn’t. The government needs to tread very … very carefully here. Lest the law of unintended consequences kick into high gear.
[update 1] didn’t take long
Yup. A small sum.
Its that little matter of being right, and having the law to back up your rights that is getting in the way of this.
Its about respecting the rule of law
From another article:
And as I predicted … some of the more … administration friendly … media (most of it) is reporting things like this:
News alert. Metaldyne already filed. Who knows if Yazaki will get paid. That is, the bankruptcy has already had this effect. So threatening that it will happen is … I dunno … somehow strange.
But the message does seem to be getting through to those who thought they could ram a bad deal through the system.
Well … not quite. Your assets are not worth as much as you hoped, but you now see that the courts will stand up for your rights. So you fight for your legitimate rights to be first in line to get paid. There is nothing wrong with that.
The whole reason why this is going pear shaped, is because of this:
The union was a junior creditor with unsecured debt. The lenders had secured debt.
Sucks to be a lender.