Ya, shape government policy, not free market economics. In this case Obama has no business telling Chrysler's creditors what to accept or not to accept. It isnt his decision to make. Only a dictator acts that way.
It's over. The non-TARP secured creditors have given up. Nightly Business Report . One on One with Thomas Lauria, Bankruptcy Attorney with White & Case | PBS Translation: We ran our bluff as far as we could, we really had nothing to stand on in front of a smart bankruptcy judge, the govt. called my bluff, so we folded our cards. I can't lose my credibility as a smart bankruptcy attorney and I need this cover story to CMA. As I tried to research this some more, what has bothered me about Tom Lauria's statements and protestations is that the only person who ever said the deal favored the unsecured creditors over the secured .30 cash offer is Lauria. Anybody can say anything. Show me the numbers. They ain't there, just more hand waving. The fact that these boys withdrew so early says to me they never had a case to demand more money. They held out till the end, trying to bluff the govt. to give them more money, and the govt. called their bluff and let the deal fall into bankruptcy. If the judge was a smart boy, and he probably is, then they knew he was not going to give them anything more. Time to fold the tent. This is what I found on the deal: http://www.autonews.com/article/20090430/ANA02/904299945/1229 So, there it is, what do you want, .30 cash for each dollar you loaned them, or 55% of the stock in new Chrysler and a note for 4.5 billion with annual payments running through 2023. What will Chrysler stock be worth at its issuance, or in 3 years? What is the value of the annual payments on the note with 823 million a year due annually from 2019-2023? Will Chrysler be there to make those payments (and if not, what is the value of the UAW deal)??? Tom Laurie is a lying attorney, creating a firestorm over nothing, bluffing the govt. to get more of our money from the govt., and when presented with the bankruptcy judge and final reality, he accepted the deal like a mouse. He played his hand to the end like a bankruptcy attorney should, using the kind of tactics that earn lawyers their reputation. Search all over the net, there is just one side of the story out there, Laurie's. You should withhold judgment until you can evaluate both sides. Now that I see the deal, I think Mr. Laurie has obfuscated the truth by quoting face value to elements of the deal that are really a crap shoot for the UAW. That is not right, its false advertising. Mr. Laurie sees it, and that is why he folded his tent and walked. I think the administration did a good job to broker this deal, and give Chrysler a chance to fight another day, maybe they can survive if we get past the great recession. If Chrysler went down, the budding consumer confidence may have been damaged and that would have been bad for the recovery. With tens of thousand more job losses right now, especially in Detroit, it would put another huge drag on an already depressed Michigan / Detroit. If they ultimately fail, it would be better to fail when the economy is doing better in a few years. Of course, every Obama hater jumped on this story and embraced it without looking for the other side of the story. The original "Laurie Statement" was published in Rupert Murdock's Wall St. Journal, which has now become no better than Fox News Channel, and I will no longer trust the WSJ. Who believes the UAW got a better deal than the secured creditors, step right up and explain it.
Nice analysis, but in the long run, Chrysler is toast. Eventually, the welfare benefits will stop and it's clear they can't survive on their own.
seems to me that O couldnt make them do anything, just applying "political pressure". a dictator "makes", a politician "pressure". there is a big dif.
Disagree. Once the senior bond holders started folding the remaining creditors had no choice because they were too small for proper standing in a bankruptcy court. If they had held together the bankruptcy judge would have been obligated to recognize their claims and distribute assets according to standard bankruptcy laws. It doesnt have anything to do with credibility, smart judges or the creditors trying to bluff. They simply folded due to government pressure and the negative public perception perpetuated by a popular President. Oppenheimer & Stairway, among others, could not withstand the attack from the White House. Ironically, if it wasnt for these 2 companies Chrysler would have been bankrupt several years ago. Nice way to thank them dont you think? :dis: I would love to see the next troubled company try to get some private monies where a big union or heavy government TARP money is involved. Good luck with that. You just answered your own question. The Union gets a note of 4.5 billion against a debt that was 8.5 billion. The secured creditors got 2 billion against 6.9 billion owed. Regardless if Chrysler succeeds or not we now have the government with ownership in the company. I am willing to bet they will make good on most, if not all, of that note if Chrysler fails. They have already given free money twice to Chrysler. What makes you think they wont do it again with this note? Recent history says they will. More of our money? :lol: They just took a pile from a bunch of pension funds with a deal shoved down the creditors throats using strong arm mafia tactics. Who's money do you think that was? Not sure how you can keep a straight face and say they wanted more of our money. Who do you think the victims are here? Incredible. Folded his tent? Obfuscated the truth? Come on. Read what Oppenheimer said, read what Stairway said, read what Schultze and the other creditors said. Both sides of the story are out there and Laurie isnt saying anything the others havent already echoed. You are characterizing this with an enormously bias slant and these accusations are not only preposterous but evidence points to the contrary. If you are the UAW of course you think Obama did a good job. They get 4.5 billion against their 8.5 billion debt, fantastic deal for them. The problem I have with Obama is the tactics he used and the way he imposed government intervention upon the free market system. Add to that the essential free money we gave Chrysler on two occasions and you have a slippery slope that just got icy to boot. This deal will also have a negative effect on the future of private fund investments. Not because of the terms on this deal but how it went down. On top of all that NOTHING has been done to address the real problems with US automakers regarding UAW's retirement benefits. That thing just rocks along like its not a concern. :insane:
That would have been a well earned negative public perception, if they wanted to liquidate Chrysler and kill 60K jobs, to up their payout from .30, to what, .35? We have a popular president trying to save a big corporation. Their self interests don't play as well to the public, and its easy to see why, sorry bout that, it is what it is. This is not about thanks, do you think Chrysler wanted to go bankrupt? Do you think every co. that goes bankrupt should be liquidated? There was massive fraud through the mortgage and banking industries and a lack of regulation that let it run wild. When it popped, car sales dropped by 40%. It's not like Chrysler wanted to go bankrupt. Nice has nothing to do with it. I guarantee the hedgies will be buying distressed debt and making 200% quick, as I don't think they were hurt by this. I haven't heard them say they took a loss, only that they wanted more money. As far as the long term creditors, clearly they mispriced risk. That was a systemic problem the last 10 years, it will be corrected for a time while the memory is fresh, and that's a good thing. Our expansions won't be so quick, but should be more sustainable. You're just guessing about the future. The govt. gave Chrysler money to limp to a reorg plan or merger, in a very abnormal economic environment, for about 4 months. If Chrysler fails and never pays back the pension note, it will fall to the PBGT just like everyone else, and you don't get full payout from them. But you never answered my question. Which deal is better, the .30 cash to the secured creditors, or 55% of Chrysler and a $4B note that will be paying out in 2023? The secured creditors whined they were not getting as much. Were they? Getting cash up front is the better deal here, and that's one of the lies they were telling, using nominal value in their PR campaign. What's the REAL VALUE??? That's the crux of this discussion. Strong arm mafia tactics? You realize the administration is standing on established legal precedent. That's the other lie Mr. Laurie told. He wants everyone to believe that under bankruptcy law the secured creditors are made whole first and that is not what is happening here. That is true sometimes, and not true all the time, and Laurie knows this well as a bankruptcy specialist, but he didn't mention that. Read: Bankruptcy Litigation Blog: Chrysler Bankruptcy Analysis - Part III: Will The "Absolute Priority Rule" Kill The Sale? Contrary to the discussion here that Obama is asserting his private view of how the pie should be divided and suspending the rule of law, the administration is supported by legal opinions. Some legal opinions conflict, but it will be decided in court, and the judge ruled that keeping Chrysler a going concern was the overriding issue. This is not just making the rules up as we go along; its legal precedent. Not all bankruptcies are the same, and the rules governing their disposition are not the same either. What was the threat? The WH press corp is gonna say your name and tell everyone that you are willing to let 60K jobs vanish so you can argue about getting another nickel on the dollar for your bonds? That sounds like telling the truth. If there was enough money involved, they'd have stood the heat. There was no more money to be had, so forget the hassle. They get a note for 4.5B, to be paid out until 2023. Will they actually get all that money? SabanFan says no. I agree with SabanFan on this one, no. What is the note really worth, and did the union get a better deal than the secured creditors who got cash up front? That is the crux of the issue, but you don't answer the question. He used established legal precedent, which I showed above. Did he twist an arm, probably. Is he the first president to do that, or the last? No. He's trying to save 60K jobs that probably would not be in danger now except for the abnormal financial meltdown going on. The administration tried to broker a deal without the court, couldn't get it done, went into Chap. 11, and the judge said proceed with the merger, per established legal bankruptcy precedent. - We gave money to Chrysler, yes, to give them a chance to survive. - Regards private funding, I think risk is being repriced and that's good. It is being repriced because risks were not properly calculated before and folks got burned because of that. This deal went down the same way other deals in bankruptcy went down because there is legal precedent to handle some bankruptcies this way. Bankruptcy is not a cookie cutter solution, it depends on the circumstances and there are different rules that apply. The Chrysler secured creditors just fail to mention that in their PR campaign.
Who said they wanted to liquidate Chrysler? They were holding out for their rightful position as senior lenders who deserved consideration under the absolute priority rule of bankruptcy laws. They thought, as do I, that the unsecured UAW debt should have been substantially reduced or almost eliminated completely. UAW's debt consisted of lavish pension funds and retirement health care costs negotiated under antiquated union contracts that should have been thrown out of any bankruptcy. The UAW's retired members are earning anywhere from 2 to 3 times as much as current active workers which is a gross inequity. The President may be operating under the guise of saving Chrysler but what he actually did was secure a substantial note for the retirement fund of his union cronies and give them an ownership in a company that is now allowed to jettison debt like yesterdays garbage and reorganize. Now your guessing. I suspect they will buy distressed senior debt but where TARP money or Unions are involved they will surely be looking twice. How could they have not taken a loss? Just because they havent said anything it stands to reason when you get 30 cents on your dollar invested that someone took a loss....no? The governenment didnt give Chrysler the money, it was supposed to be a loan. Until the end game that money was supposed to be repaid. Let me ask you this, how do you think congress would have reacted, or what would the public opinion have been, if the 4 billion Chrysler got was said to be a gift? Lets propose the legislation, we are going to give Chrysler 4 billion dollars and it doesnt have to be repaid. How do you think that would have gone down if it was proposed that way? I think the UAW got a better deal and thats my opinion. Just like its your opinion that the senior debtors are getting a better deal. I dont think either can be proven to be 100% correct but I think the UAW is going to come out far better in the end. Only time will tell but Chrysler (or whoever was behnd it) made a shrewd decision to shut down all their operations prior to bankruptcy which may have reduced the value of their assets. I wonder who made that decision? They are not standing on established legal precedent and its not supported by any clear cut rule of law. Many rulings and opinions differ from what Obama proposed and there is nothing that absolutely says Chryslers bankruptcy was going down based on the information cited in that blog. Even whats in that blog is contradictory. That is a very thin argument on Chryslers behalf when there is clearly priority structuring in the bankruptcy code that even that blog opinion acknowledges. I have answered it and the union got a better deal in my opinion. As stated, we wont know for some time but in the end I believe the union will end up with more of their money on the dollar then the secured creditors got. Fail...not established and certainly not clear as evidenced by the very blog you cited. Most bankruptcies are very much cookie cutter. What you are citing as established legal precedent is an obscure exception, not the rule. Nobody has tested that water in a case like Chryslers and there is nothing the administration can point there finger at and say "there it is". It just dont work that way. Thats contradictory to what the President himself said. He said that Chrysler failed because they couldn't make fuel efficient cars. What he fails to discuss, as most anyone on Chrysler's side does, is that 55% of the cost of each car goes to fund lavish retirement and health care benefits for workers who are no longer producing for the company. That leaves them with a slim margin to work on cost saving as long as that albatross is strangling them.
See my quote on page 2, post #24: They were dabbliing in distressed debt, they bought too soon. Read: http://www.bloomberg.com/apps/news?pid=20601087&sid=aowmZkX0TzEE&refer=home They had a fair opportunity to assess the situation, and it got worse than they expected. In the settlement snippet I have above describing the deal, the govt. gets 5% of the new Chrysler. I was just writing fast and didn't include every detail which had been cited before. I agree, only time will tell. I would take a bird in the hand on this deal, rather than try for two in the bush... They are standing on legal precedent. There are conflicting opinions, but are there overriding factors in this case, I think the answer is yes, like the ability to restructure Chrysler intact. Read: http://www.bloomberg.com/apps/news?pid=20601087&sid=aowmZkX0TzEE&refer=home As I have said before, this is just how you negotiate in bankruptcy. The dissenters attorney, Laurie, got paid a fee, he had to say something and threaten the govt. to try to get a better settlement for his customers, and he published a simple, incomplete, statement. The govt. called his bluff by allowing the deal to go to bankruptcy court rather than by giving them more money to complete a sale outside of bankruptcy. But, apparently, this is done "regularly", according to an expert who is NOT associated with this proceeding.
it's a good thing they had 70% of the senior creditors on board to see the importance of keeping the Union intact and in control of the company to pay off some of those legacy costs. I wonder why they were so interested in allowing this to happen? Must have made better business sense than taking an extra $.30 or $.40 on the dollar, right Houtiger? Couldn't have been anything else going on there. Unfortunately you have mistaken making a point then realizing it will be more costly to fight a losing battle for bluffing and then laying their hand down.
The other option is that the rest of the secured creditors see that .30 is a lot better offer than going to auction for some big buildings in Detroit and some great machines for making Prowlers. You know anybody expanding their business in the auto industry today? They might only get .15 for that stuff at auction, that's a risk. The majority of the creditors are not willing to take that risk. My quote just above says the secured debt was trading at .15 on your "free market". Does that say the real liquidation value is .65? No, it says the liquidation value is NOT .65, it's a LOT LESS. So, where do you come up with "extra $.30 or $.40 on the dollar", or are you still just believing outright the attorney for the minority dissenters, who is clearly biased in this deal? I will trust the market and the .15 price of the bonds as much closer to the truth.
