Chrysler to file for bankruptcy

[CADsortaGUY]

Originally posted by: K1052

Originally posted by: trooper11
my question is simple: why didnt they let this happen in the first place?

why all talk about getting chrysler back on its feet with our money? they were too big to fail right?

lets say they went into bankruptcy months ago, before propping them up with taxpayer money, wouldnt the outcome be the same? Massive layoffs, creditors get the shaft, etc. the only difference being the UAW wouldnt own 55% of Chrysler, the goverment wouldnt have a stake in the matter, and the taxpayers wouldnt be on the hook for billions. Heck, the merger with Fiat would have probably still happened.

it looks to me like an alternative would have been to let them go into bankruptcy and then soften the blow to the economy by extending unemployment benefits to those workers affected during that time. If Obama really doesnt want that kind of control over them, that would have been a way to directly support the people without the hassle of running a company.

The company wouldn't have been restructured, it would have ended up liquidated. There also would be a high probability that a number of important suppliers to would go down shortly thereafter which would cascade further down the chain.

Employees wiped out.
Shareholders wiped out.
Enormous unmet pension and health care commitments unfunded.
Car warranties rendered worthless.
Bondholders getting pennies on the dollar except for the CDS holding folks (who get to fuck Uncle Sam in the rear).

Sounds like a winner to me...

It MIGHT have been liquidated, but it also could have restructured. You don't know what would have happened any more than you know what the future outcome will be.

However, looking back was it really worth dumping billions after billions into this company when it will still go BK?(as it's just filed)

 

[K1052]

Originally posted by: CADsortaGUY

Originally posted by: K1052

Originally posted by: trooper11
my question is simple: why didnt they let this happen in the first place?

why all talk about getting chrysler back on its feet with our money? they were too big to fail right?

lets say they went into bankruptcy months ago, before propping them up with taxpayer money, wouldnt the outcome be the same? Massive layoffs, creditors get the shaft, etc. the only difference being the UAW wouldnt own 55% of Chrysler, the goverment wouldnt have a stake in the matter, and the taxpayers wouldnt be on the hook for billions. Heck, the merger with Fiat would have probably still happened.

it looks to me like an alternative would have been to let them go into bankruptcy and then soften the blow to the economy by extending unemployment benefits to those workers affected during that time. If Obama really doesnt want that kind of control over them, that would have been a way to directly support the people without the hassle of running a company.

The company wouldn't have been restructured, it would have ended up liquidated. There also would be a high probability that a number of important suppliers to would go down shortly thereafter which would cascade further down the chain.

Employees wiped out.
Shareholders wiped out.
Enormous unmet pension and health care commitments unfunded.
Car warranties rendered worthless.
Bondholders getting pennies on the dollar except for the CDS holding folks (who get to fuck Uncle Sam in the rear).

Sounds like a winner to me...

It MIGHT have been liquidated, but it also could have restructured. You don't know what would have happened any more than you know what the future outcome will be.

However, looking back was it really worth dumping billions after billions into this company when it will still go BK?(as it's just filed)

Without government backing it never would have made it out of Chapter 11, car makers don't go into bankruptcy to lick their wounds they go to curl up and die. I'm not even totally sold on the idea that Chrysler will make it through the process with government support now.

 

[dullard]

Originally posted by: K1052
Without government backing it never would have made it out of Chapter 11, car makers don't go into bankruptcy to lick their wounds they go to curl up and die.

Chrysler curling up and dying could ultimately be the saviour of GM. True, there will be short-term pains especially with suppliers. But once that is all sorted out, there will be a significant uptick in demand of GM vehicles. Chrysler buyers will also go to Ford and foreign makers. But, there would be enough that go to GM to actually save GM.

Chrysler should have been left to die. I've said that for months. I'm still uncertain about government interference with GM.

Oh, and since I didn't see it in the thread. Chrysler has now officially filed. The thread title can be updated.

 

[CADsortaGUY]

Originally posted by: K1052

Originally posted by: CADsortaGUY

Originally posted by: K1052

Originally posted by: trooper11
my question is simple: why didnt they let this happen in the first place?

why all talk about getting chrysler back on its feet with our money? they were too big to fail right?

lets say they went into bankruptcy months ago, before propping them up with taxpayer money, wouldnt the outcome be the same? Massive layoffs, creditors get the shaft, etc. the only difference being the UAW wouldnt own 55% of Chrysler, the goverment wouldnt have a stake in the matter, and the taxpayers wouldnt be on the hook for billions. Heck, the merger with Fiat would have probably still happened.

it looks to me like an alternative would have been to let them go into bankruptcy and then soften the blow to the economy by extending unemployment benefits to those workers affected during that time. If Obama really doesnt want that kind of control over them, that would have been a way to directly support the people without the hassle of running a company.

The company wouldn't have been restructured, it would have ended up liquidated. There also would be a high probability that a number of important suppliers to would go down shortly thereafter which would cascade further down the chain.

Employees wiped out.
Shareholders wiped out.
Enormous unmet pension and health care commitments unfunded.
Car warranties rendered worthless.
Bondholders getting pennies on the dollar except for the CDS holding folks (who get to fuck Uncle Sam in the rear).

Sounds like a winner to me...

It MIGHT have been liquidated, but it also could have restructured. You don't know what would have happened any more than you know what the future outcome will be.

However, looking back was it really worth dumping billions after billions into this company when it will still go BK?(as it's just filed)

Without government backing it never would have made it out of Chapter 11, car makers don't go into bankruptcy to lick their wounds they go to curl up and die. I'm not even totally sold on the idea that Chrysler will make it through the process with government support now.

It MIGHT not have made it out. So? Do you really buy that "too big to fail" BS? If the company can't stand on it's own - let it go away, get eaten up, etc and the economy/market/etc will be better for it in the long run.

 

[BoberFett]

For as much as Democrats hate the ICE, they sure want to keep these auto companies pumping out millions of cars...

 

[zephyrprime]

Originally posted by: senseamp

Originally posted by: CADsortaGUY
:thumbsup: Good to see the creditors standing up to the whitehouse and telling them to get bent (re 29cents on the dollar).

This is what should have happened last fall.

They probably own AIG's credit default swaps on Chrysler, so they can bend uncle Sam over for much more than 29 cents on the dollar when Chrysler is in bankruptcy.

If they go to bankruptcy, they can probably get 100% on the dollar from the credit default swaps (which are like insurance) even if they get 0 cents on the dollar from the bankruptcy court. Bankruptcy is considered a credit event but the governments negotiated settlement may not be. That's probably the whole reason they're willing to go to bankruptcy. I doubt that they could possibly get a better deal on debt reclamation from bankruptcy court than the current government deal. Notice that it's hedge funds that are caused this to go to bankruptcy court. They're probably the only debt parties that were sophisticated enough to buy CDSs.

 

[theeedude]

The beauty is of course that taxpayer is on the hook either way, because we now own AIG. So we are going to bail out Chrysler, and pay off hedge funds gambling on its demise with taxpayer funds.

 

[LTC8K6]

http://voices.washingtonpost.c..._say.html?hpid=topnews

Lenders of about $1B total to Chrysler say they were not allowed to participate in the negotiations.

 

[CADsortaGUY]

Originally posted by: LTC8K6
http://voices.washingtonpost.c..._say.html?hpid=topnews

Lenders of about $1B total to Chrysler say they were not allowed to participate in the negotiations.

Yep, and the other "banks" are already owned by us so what does it matter if the "lose" a couple more billion. Hell, one could surmise that they were strong armed by the whitehouse due to the TARP issue.

I think more needs to be flushed out about this:

?long recognized legal and business principles? that gives senior lenders such as themselves the right to be repaid in full before others recover anything in bankruptcy court.

 

[LTC8K6]

Michigan is going to be hurt a lot because apparently many of these lenders are based there, as are many suppliers. All are now out a heck of a lot of money that they should have had a chance to negotiate over.

 

[Dari]

Originally posted by: zephyrprime

Originally posted by: senseamp

Originally posted by: CADsortaGUY
:thumbsup: Good to see the creditors standing up to the whitehouse and telling them to get bent (re 29cents on the dollar).

This is what should have happened last fall.

They probably own AIG's credit default swaps on Chrysler, so they can bend uncle Sam over for much more than 29 cents on the dollar when Chrysler is in bankruptcy.

If they go to bankruptcy, they can probably get 100% on the dollar from the credit default swaps (which are like insurance) even if they get 0 cents on the dollar from the bankruptcy court. Bankruptcy is considered a credit event but the governments negotiated settlement may not be. That's probably the whole reason they're willing to go to bankruptcy. I doubt that they could possibly get a better deal on debt reclamation from bankruptcy court than the current government deal. Notice that it's hedge funds that are caused this to go to bankruptcy court. They're probably the only debt parties that were sophisticated enough to buy CDSs.

I really hope the assholes selling CDSs after the market implosion last fall had reserves for them. If not, then I can't find any way in my heart to support bailing them out of that.

 

[cubby1223]

Originally posted by: CADsortaGUY
And they are legally able to do just what they are doing. They didn't have to take the raw deal and they didn't. Just because some of them bent over for the whitehouse doesn't mean that others should just take it too. Let the process work and stop messing with the private sector already. There is a reason we have things like BK in our system - let it work.

Yeah, but it almost sounds like the White House may still play a role in the restructuring. UAW may end up owning 55% of the company. But on the other hand, maybe it'll be a good lesson for the UAW if they are now in charge of having to make the tough decisions to run a profitable company.

All I hope is that it's the permanent end of tax payer funds.

 

[CADsortaGUY]

Originally posted by: cubby1223

Originally posted by: CADsortaGUY
And they are legally able to do just what they are doing. They didn't have to take the raw deal and they didn't. Just because some of them bent over for the whitehouse doesn't mean that others should just take it too. Let the process work and stop messing with the private sector already. There is a reason we have things like BK in our system - let it work.

Yeah, but it almost sounds like the White House may still play a role in the restructuring. UAW may end up owning 55% of the company. But on the other hand, maybe it'll be a good lesson for the UAW if they are now in charge of having to make the tough decisions to run a profitable company.

All I hope is that it's the permanent end of tax payer funds.

Oh sure, that whole part sucks too but it's not near as bad as continued bailouts... er I mean handouts. I too hope that we can be free of this boondoggle soon.

 

[Xellos2099]

UAW is the source of the big 2 problem. Ford is still fine because they buy out some of the union contract a few years ago.

 

[halik]

Originally posted by: Xellos2099
UAW is the source of the big 2 problem. Ford is still fine because they buy out some of the union contract a few years ago.

No-o. Ford is doing better because they sold off many, many brands couple years ago and have cash. They're still loosing money, a ton of it.

 

[halik]

Originally posted by: Dari

Originally posted by: zephyrprime

Originally posted by: senseamp

Originally posted by: CADsortaGUY
:thumbsup: Good to see the creditors standing up to the whitehouse and telling them to get bent (re 29cents on the dollar).

This is what should have happened last fall.

They probably own AIG's credit default swaps on Chrysler, so they can bend uncle Sam over for much more than 29 cents on the dollar when Chrysler is in bankruptcy.

If they go to bankruptcy, they can probably get 100% on the dollar from the credit default swaps (which are like insurance) even if they get 0 cents on the dollar from the bankruptcy court. Bankruptcy is considered a credit event but the governments negotiated settlement may not be. That's probably the whole reason they're willing to go to bankruptcy. I doubt that they could possibly get a better deal on debt reclamation from bankruptcy court than the current government deal. Notice that it's hedge funds that are caused this to go to bankruptcy court. They're probably the only debt parties that were sophisticated enough to buy CDSs.

I really hope the assholes selling CDSs after the market implosion last fall had reserves for them. If not, then I can't find any way in my heart to support bailing them out of that.

I thought the 29 cents on the dollar offer was to secured debt holders?
If that's the case, there's no CDS play ... they just take possession of whatever assets the debt was secured against. Think repo man if you default on your car loan.

 

[K1052]

Originally posted by: halik

Originally posted by: Dari

Originally posted by: zephyrprime

Originally posted by: senseamp

Originally posted by: CADsortaGUY
:thumbsup: Good to see the creditors standing up to the whitehouse and telling them to get bent (re 29cents on the dollar).

This is what should have happened last fall.

They probably own AIG's credit default swaps on Chrysler, so they can bend uncle Sam over for much more than 29 cents on the dollar when Chrysler is in bankruptcy.

If they go to bankruptcy, they can probably get 100% on the dollar from the credit default swaps (which are like insurance) even if they get 0 cents on the dollar from the bankruptcy court. Bankruptcy is considered a credit event but the governments negotiated settlement may not be. That's probably the whole reason they're willing to go to bankruptcy. I doubt that they could possibly get a better deal on debt reclamation from bankruptcy court than the current government deal. Notice that it's hedge funds that are caused this to go to bankruptcy court. They're probably the only debt parties that were sophisticated enough to buy CDSs.

I really hope the assholes selling CDSs after the market implosion last fall had reserves for them. If not, then I can't find any way in my heart to support bailing them out of that.

I thought the 29 cents on the dollar offer was to secured debt holders?
If that's the case, there's no CDS play ... they just take possession of whatever assets the debt was secured against. Think repo man if you default on your car loan.

The bondholders get paid off with the assets. The CDS holders get paid by whoever sold the derivative. It just happens in this case that some wily hedge funds acquired enough of the bonds to force the company into bankruptcy in order to trigger the conceivably much larger CDS payout.

Had not the government propped up the financial sector and those entities who wrote massive amounts of CDS the fallout would have obliterated the funds doing this. Effectively the funds are taking the knife the government used to keep them free and turning it on them, Chrysler, and the other debt holders to make a quick buck.

 

[LTC8K6]

http://uk.reuters.com/article/.../idUKTRE54017D20090501

"NEW YORK (Reuters) - A group of about 20 lenders that balked at the terms of a government-brokered deal to cut Chrysler LLC's $6.9 billion debt, are now planning to object to the company's planned bankruptcy sale, their attorney said on Thursday.

Chrysler LLC filed for Chapter 11 bankruptcy protection in New York on Thursday, saying that it would sell its core assets including its Chrysler, Jeep and Dodge brands into a new company that would be owned by the U.S. government, Fiat SpA and the company's workers.

The plan, however, depends on U.S. Bankruptcy Court approval of the sale, and this group of lenders feels the current plan to sell those assets within 30 to 60 days may infringe on their legal rights.

"We're just standing on the law," said Tom Lauria, a bankruptcy attorney at White & Case, representing a group of about 20 Chrysler first lien senior secured lenders.

"They (Chrysler) say they are going to allocate out and distribute the proceeds of the sale in a way that they couldn't do if they were going to do it under a Chapter 11 plan," he added.

The group of lenders Lauria represents includes Oppenheimer Funds, Stairway Capital and other secured lenders who have their own group of investors, including teachers' credit unions, pension funds, retiree plans, college endowments, and retirement funds.

He said the group understands the need for Chrysler to sell itself and for the industry to restructure, but owes a fiduciary duty to its investors and objects to the way Chrysler is trying to divvy up the proceeds of the bankruptcy sale without putting it to a creditor vote.
..."

 

[LTC8K6]

"This is not an objection to rescuing Chrysler, Lauria said.
Rather, Lauria said, Chrysler's proposed plan "inverts" the classic priority scheme written into the bankruptcy code, where senior secured creditors are paid in full first, followed by junior lenders, administrative claims, unsecured lenders and equity holders.

"The sale is an attempt to end-run the procedural protections that are provided to stakeholders by Chapter 11," he said.

"What's happening is the senior secured creditors are going to get 29 cents on the dollar and the unsecured creditors are going to get $10 billion (6.8 billion pounds)."

Lauria said his clients had viewed the quality of their collateral as secure and took correspondingly low interest rates on their loans to Chrysler because the loans were "seemingly secure." But now the lenders find themselves effectively subsidizing more junior creditors, in a way that would not typically occur under the bankruptcy code, Lauria said.

"No court has ever approved something like this before. It is without precedent," Lauria said."

 

[CADsortaGUY]

Originally posted by: LTC8K6
"This is not an objection to rescuing Chrysler, Lauria said.
Rather, Lauria said, Chrysler's proposed plan "inverts" the classic priority scheme written into the bankruptcy code, where senior secured creditors are paid in full first, followed by junior lenders, administrative claims, unsecured lenders and equity holders.

"The sale is an attempt to end-run the procedural protections that are provided to stakeholders by Chapter 11," he said.

"What's happening is the senior secured creditors are going to get 29 cents on the dollar and the unsecured creditors are going to get $10 billion (6.8 billion pounds)."

Lauria said his clients had viewed the quality of their collateral as secure and took correspondingly low interest rates on their loans to Chrysler because the loans were "seemingly secure." But now the lenders find themselves effectively subsidizing more junior creditors, in a way that would not typically occur under the bankruptcy code, Lauria said.

"No court has ever approved something like this before. It is without precedent," Lauria said."

Like I've stated, it's pretty damn arrogant of the whitehouse to be doing this and then yesterday whining that these people didn't bend over for them.

 

[K1052]

Originally posted by: CADsortaGUY

Originally posted by: LTC8K6
"This is not an objection to rescuing Chrysler, Lauria said.
Rather, Lauria said, Chrysler's proposed plan "inverts" the classic priority scheme written into the bankruptcy code, where senior secured creditors are paid in full first, followed by junior lenders, administrative claims, unsecured lenders and equity holders.

"The sale is an attempt to end-run the procedural protections that are provided to stakeholders by Chapter 11," he said.

"What's happening is the senior secured creditors are going to get 29 cents on the dollar and the unsecured creditors are going to get $10 billion (6.8 billion pounds)."

Lauria said his clients had viewed the quality of their collateral as secure and took correspondingly low interest rates on their loans to Chrysler because the loans were "seemingly secure." But now the lenders find themselves effectively subsidizing more junior creditors, in a way that would not typically occur under the bankruptcy code, Lauria said.

"No court has ever approved something like this before. It is without precedent," Lauria said."

Like I've stated, it's pretty damn arrogant of the whitehouse to be doing this and then yesterday whining that these people didn't bend over for them.

There is also some talk out there about some of these holdout creditors actively encouraging Chrysler's demise because of their much larger positions in competitive automakers.

This whole charade you're parading concerning the rights of these poor innocent creditors in the face of a belligerent White House is so absurd and willfully myopic that it's tragic.

 

[LTC8K6]

Makes no difference if you want to call them arrogant or greedy. They are secured creditors. That's a fact. That fact will not go away in bankruptcy court.

If CH11 laws are followed, the secured creditors will have a large say in this process.

Greedy or not.

 

[BeauJangles]

Originally posted by: halik

Originally posted by: Xellos2099
UAW is the source of the big 2 problem. Ford is still fine because they buy out some of the union contract a few years ago.

No-o. Ford is doing better because they sold off many, many brands couple years ago and have cash. They're still loosing money, a ton of it.

Right, I wouldn't say Ford is "fine," but their problems are in line with the industry standard right now.

Chrysler is just a mismanaged piece of shit that deserves to whither away. It's obvious that there aren't enough consumers within the US or abroad to support the number of cars produced. So why are we trying to prop up a company that obviously doesn't have its shit together and can't sell new vehicles anyway?

 

[CADsortaGUY]

Originally posted by: K1052

Originally posted by: CADsortaGUY

Originally posted by: LTC8K6
"This is not an objection to rescuing Chrysler, Lauria said.
Rather, Lauria said, Chrysler's proposed plan "inverts" the classic priority scheme written into the bankruptcy code, where senior secured creditors are paid in full first, followed by junior lenders, administrative claims, unsecured lenders and equity holders.

"The sale is an attempt to end-run the procedural protections that are provided to stakeholders by Chapter 11," he said.

"What's happening is the senior secured creditors are going to get 29 cents on the dollar and the unsecured creditors are going to get $10 billion (6.8 billion pounds)."

Lauria said his clients had viewed the quality of their collateral as secure and took correspondingly low interest rates on their loans to Chrysler because the loans were "seemingly secure." But now the lenders find themselves effectively subsidizing more junior creditors, in a way that would not typically occur under the bankruptcy code, Lauria said.

"No court has ever approved something like this before. It is without precedent," Lauria said."

Like I've stated, it's pretty damn arrogant of the whitehouse to be doing this and then yesterday whining that these people didn't bend over for them.

There is also some talk out there about some of these holdout creditors actively encouraging Chrysler's demise because of their much larger positions in competitive automakers.

This whole charade you're parading concerning the rights of these poor innocent creditors in the face of a belligerent White House is so absurd and willfully myopic that it's tragic.

Whatever these supposed motives you attribute to them matter exactly ZERO. They are a secured creditor and the whitehouse wants to turn them into a partially secured lender. If you want to talk about myopic - you should be looking at the WH and in a mirror and then consider what the repercussions will be long term if you F over primaries. Do you really think secured lenders will be as willing to lend in the future if they know the gov't can just step in and take their $ away? tragic indeed...

 

[LTC8K6]

These terms have legal weight. They are not just made up by greedy companies to get their way.

http://en.wikipedia.org/wiki/Secured_creditor

http://en.wikipedia.org/wiki/Unsecured_creditor