Chrysler to file for bankruptcy

[K1052]

Originally posted by: 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...

The automakers because of their structure, condition, and history represent pretty unique cases. It shouldn't be sacrificed just because a group of minority creditors (who wouldn't even exist today without the government's not legally required liquidity aid and CDS rescue) want to see it dead.

 

[K1052]

Originally posted by: 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

If you want to get technical the government could have legally sat on its hands while most of the financial sector (the bulk of these creditors included) sank into the quicksand they drove themselves into.

 

[Genx87]

Originally posted by: K1052

Originally posted by: 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

If you want to get technical the government could have legally sat on its hands while most of the financial sector (the bulk of these creditors included) sank into the quicksand they drove themselves into.

The govt certainly could have but didnt and it really doesnt have any relevance over a secured creditor excercising their legal right.

 

[K1052]

Originally posted by: Genx87

Originally posted by: K1052

Originally posted by: 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

If you want to get technical the government could have legally sat on its hands while most of the financial sector (the bulk of these creditors included) sank into the quicksand they drove themselves into.

The govt certainly could have but didnt and it really doesnt have any relevance over a secured creditor excercising their legal right.

If the hedge funds want to play hardball that's fine. They're going to get paid for their CDS holdings with your tax money and the other holdouts hoping for Chrysler's demise to improve their Ford/GM positions will probably get no better than what was offered in the deal which will dash their hopes. The judge presiding over the bankruptcy doesn't sound like one who's going to let the holdouts drag this on to their advantage.

Meanwhile Congress has been considering giving the SEC total regulatory oversight power over hedge funds and that seems to have garnered some new momentum recently....I wonder why. In the end they've made a quick buck but have just f'd themselves long term.

 

[halik]

Originally posted by: K1052

If the hedge funds want to play hardball that's fine. They're going to get paid for their CDS holdings with your tax money and the other holdouts hoping for Chrysler's demise to improve their Ford/GM positions will probably get no better than what was offered in the deal which will dash their hopes. The judge presiding over the bankruptcy doesn't sound like one who's going to let the holdouts drag this on to their advantage.

Meanwhile Congress has been considering giving the SEC total regulatory oversight power over hedge funds and that seems to have garnered some new momentum recently....I wonder why. In the end they've made a quick buck but have just f'd themselves long term.

Originally posted by: K1052

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.

Do you have anything to back up the claims? Chrysler CDS were trading for 90something cents on the dollar for a long time now, so for that strategy to work the PE/hedge funds must've bought the CDSs loong time ago.

I know GM CDS was trading for 96-99 cents on the dollar back in oct-dec, so the profit marging there isn't great.

 

[Genx87]

Originally posted by: K1052

If the hedge funds want to play hardball that's fine. They're going to get paid for their CDS holdings with your tax money and the other holdouts hoping for Chrysler's demise to improve their Ford/GM positions will probably get no better than what was offered in the deal which will dash their hopes. The judge presiding over the bankruptcy doesn't sound like one who's going to let the holdouts drag this on to their advantage.

Meanwhile Congress has been considering giving the SEC total regulatory oversight power over hedge funds and that seems to have garnered some new momentum recently....I wonder why. In the end they've made a quick buck but have just f'd themselves long term.

Do you have proof these particular hedge funds want Crysler to fail so they can collect a CDS?

 

[K1052]

Originally posted by: halik

Originally posted by: K1052

If the hedge funds want to play hardball that's fine. They're going to get paid for their CDS holdings with your tax money and the other holdouts hoping for Chrysler's demise to improve their Ford/GM positions will probably get no better than what was offered in the deal which will dash their hopes. The judge presiding over the bankruptcy doesn't sound like one who's going to let the holdouts drag this on to their advantage.

Meanwhile Congress has been considering giving the SEC total regulatory oversight power over hedge funds and that seems to have garnered some new momentum recently....I wonder why. In the end they've made a quick buck but have just f'd themselves long term.

Originally posted by: K1052

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.

Do you have anything to back up the claims? Chrysler CDS were trading for 90something cents on the dollar for a long time now, so for that strategy to work the PE/hedge funds must've bought the CDSs loong time ago.

I know GM CDS was trading for 96-99 cents on the dollar back in oct-dec, so the profit marging there isn't great.

Without knowing the specifics about when they bought the CDS and what they paid for them it's impossible to make an educated guess. This is one of the only things that can explain their behavior though as the bankruptcy proceeding is pretty unlikely to reward them with anything more than the government backed deal and quite possibly less if the assets are valued at fire sale prices.

 

[halik]

Originally posted by: K1052

Originally posted by: halik

Originally posted by: K1052

If the hedge funds want to play hardball that's fine. They're going to get paid for their CDS holdings with your tax money and the other holdouts hoping for Chrysler's demise to improve their Ford/GM positions will probably get no better than what was offered in the deal which will dash their hopes. The judge presiding over the bankruptcy doesn't sound like one who's going to let the holdouts drag this on to their advantage.

Meanwhile Congress has been considering giving the SEC total regulatory oversight power over hedge funds and that seems to have garnered some new momentum recently....I wonder why. In the end they've made a quick buck but have just f'd themselves long term.

Originally posted by: K1052

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.

Do you have anything to back up the claims? Chrysler CDS were trading for 90something cents on the dollar for a long time now, so for that strategy to work the PE/hedge funds must've bought the CDSs loong time ago.

I know GM CDS was trading for 96-99 cents on the dollar back in oct-dec, so the profit marging there isn't great.

Without knowing the specifics about when they bought the CDS and what they paid for them it's impossible to make an educated guess. This is one of the only things that can explain their behavior though as the bankruptcy proceeding is pretty unlikely to reward them with anything more than the government backed deal and quite possibly less if the assets are valued at fire sale prices.

Your math is off, the debt we're talking about is secured against assets (generally plants and commercial real estate). As someone that's worked at a commercial RE brokerage, I can tell you they'll recover more than 29 cents on the dollar.

As far as Obama's little speech about taking sacrifices, it was nothing but populist bullshit. Secured debt means you're legally entitled to either the debt maintenance or the assets the debt was collateralized against.

 

[Engineer]

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.

While Ford may have some extra money and are still losing money, their rate of cash burn is FAR, FAR, FAR less than either GM or Chrysler. Also, Ford has been undergoing a transition for many more years than GM/Chrysler (I'm looking at Ford from the supplier side and can see and hear of some of the things they are planning) and have been working on product mix and other issues well before GM/Chrysler. Ford is the only one of the former big 3 that is actually ramping up production during the 2nd quarter (up 25% by the end of the quarter). That's not a company that is anywhere near the same position as GM/Chrysler.

Whether Ford can make it or not is still another story. Depends if the broader economy returns to a better level or not and people begin buying cars. I look for GM/Chryslers loss to be Fords gains.

 

[Xellos2099]

Originally posted by: Engineer

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.

While Ford may have some extra money and are still losing money, their rate of cash burn is FAR, FAR, FAR less than either GM or Chrysler. Also, Ford has been undergoing a transition for many more years than GM/Chrysler (I'm looking at Ford from the supplier side and can see and hear of some of the things they are planning) and have been working on product mix and other issues well before GM/Chrysler. Ford is the only one of the former big 3 that is actually ramping up production during the 2nd quarter (up 25% by the end of the quarter). That's not a company that is anywhere near the same position as GM/Chrysler.

Whether Ford can make it or not is still another story. Depends if the broader economy returns to a better level or not and people begin buying cars. I look for GM/Chryslers loss to be Fords gains.

Do you realize how much GM and Chrysler pay to their retired worker each month? I believe it is around 1-2 grand per month, including all these medical;ly expense. How could a company afford to pay thousands to non-producing individual while remaining profit? The truth is it can't. Job bank was entire bullshit as well as it do nothing but drain up a company's cash, like an vampire. With all these policy in place, how big the big 3 "not" fail. GM is over, since it is basically government and union owned. They are nto known to made company profitable. I will be all strike strike strike or let raise tax to pay for the company's loss.

 

[zephyrprime]

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.

Too late. We already did! (AIG) I don't think they sold those cds's after fall though. Not sure if anyone else was fool enough to sell automaker cds's after the fall.

 

[Engineer]

Originally posted by: Xellos2099

Originally posted by: Engineer

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.

While Ford may have some extra money and are still losing money, their rate of cash burn is FAR, FAR, FAR less than either GM or Chrysler. Also, Ford has been undergoing a transition for many more years than GM/Chrysler (I'm looking at Ford from the supplier side and can see and hear of some of the things they are planning) and have been working on product mix and other issues well before GM/Chrysler. Ford is the only one of the former big 3 that is actually ramping up production during the 2nd quarter (up 25% by the end of the quarter). That's not a company that is anywhere near the same position as GM/Chrysler.

Whether Ford can make it or not is still another story. Depends if the broader economy returns to a better level or not and people begin buying cars. I look for GM/Chryslers loss to be Fords gains.

Do you realize how much GM and Chrysler pay to their retired worker each month? I believe it is around 1-2 grand per month, including all these medical;ly expense. How could a company afford to pay thousands to non-producing individual while remaining profit? The truth is it can't. Job bank was entire bullshit as well as it do nothing but drain up a company's cash, like an vampire. With all these policy in place, how big the big 3 "not" fail. GM is over, since it is basically government and union owned. They are nto known to made company profitable. I will be all strike strike strike or let raise tax to pay for the company's loss.

Sure I realize that legacy costs are killing the former big 3 but I mentioned nothing about GM in the above post. Was simply talking about Ford being in the best position to come out alive because they started taking steps years ahead of the others. Not sure where your post is coming from.

Edit: Ford must be doing something right as they outsold Toyota for the month of April (per CNBC). I assume this is US sales only as there is no way that Ford outsold Toyota on a worldwide basis.

 

[K1052]

Originally posted by: halik
Your math is off, the debt we're talking about is secured against assets (generally plants and commercial real estate). As someone that's worked at a commercial RE brokerage, I can tell you they'll recover more than 29 cents on the dollar.

As far as Obama's little speech about taking sacrifices, it was nothing but populist bullshit. Secured debt means you're legally entitled to either the debt maintenance or the assets the debt was collateralized against.

Auto sales are in the shitter (lessening somewhat the desirability of a physical plant that needs updating) and so is the commercial RE market. At this point I think getting 29 cents on the dollar out of a liquidation sale is probably optimistic.

Who's going to buy or lease these properties and with what money and for what purpose? A couple foreign companies might cherry pick a few assets but nobody wants the rest.

 

[LTC8K6]

If the hedge funds want to play hardball that's fine

No. They are trying to play the game normally.

The Obama admin is trying to play hardball and give unsecured creditors preference over secured creditors.

It is the Obama admin that is trying to do things out of the ordinary.

Hopefully it will not happen, but I doubt anyone would be surprised if the Obama admin manages to get around the normal procedures and please the UAW.

 

[Pneumothorax]

I just hope these car companies don't end up just like the UK car companies that their own government thought they could bail out. Last time I checked, there are no more independent large scale UK car manufacturers.

 

[halik]

Originally posted by: K1052

Originally posted by: halik
Your math is off, the debt we're talking about is secured against assets (generally plants and commercial real estate). As someone that's worked at a commercial RE brokerage, I can tell you they'll recover more than 29 cents on the dollar.

As far as Obama's little speech about taking sacrifices, it was nothing but populist bullshit. Secured debt means you're legally entitled to either the debt maintenance or the assets the debt was collateralized against.

Auto sales are in the shitter (lessening somewhat the desirability of a physical plant that needs updating) and so is the commercial RE market. At this point I think getting 29 cents on the dollar out of a liquidation sale is probably optimistic.

Who's going to buy or lease these properties and with what money and for what purpose? A couple foreign companies might cherry pick a few assets but nobody wants the rest.

Obviously it's worth more than 29cents, otherwise the creditors would've taken that deal. Think about it - is'a in their best interest to recoup as much as they can AND they make living investing in debt. The only feasible asnwer why they didn't take the deal is if the assets are worth more than 29 cents on the dollar.

 

[K1052]

Originally posted by: halik

Originally posted by: K1052

Originally posted by: halik
Your math is off, the debt we're talking about is secured against assets (generally plants and commercial real estate). As someone that's worked at a commercial RE brokerage, I can tell you they'll recover more than 29 cents on the dollar.

As far as Obama's little speech about taking sacrifices, it was nothing but populist bullshit. Secured debt means you're legally entitled to either the debt maintenance or the assets the debt was collateralized against.

Auto sales are in the shitter (lessening somewhat the desirability of a physical plant that needs updating) and so is the commercial RE market. At this point I think getting 29 cents on the dollar out of a liquidation sale is probably optimistic.

Who's going to buy or lease these properties and with what money and for what purpose? A couple foreign companies might cherry pick a few assets but nobody wants the rest.

Obviously it's worth more than 29cents, otherwise the creditors would've taken that deal. Think about it - is'a in their best interest to recoup as much as they can AND they make living investing in debt. The only feasible asnwer why they didn't take the deal is if the assets are worth more than 29 cents on the dollar.

Unless they are holding CDS that would pay out favorably (supposedly about $3B worth floating around out there), want to strengthen the positions they hold in Ford/GM by knocking Chrysler out of the mix, or both (in addition to getting the 29-33 cent bond payout).

 

[halik]

Originally posted by: K1052

Originally posted by: halik

Originally posted by: K1052

Originally posted by: halik
Your math is off, the debt we're talking about is secured against assets (generally plants and commercial real estate). As someone that's worked at a commercial RE brokerage, I can tell you they'll recover more than 29 cents on the dollar.

As far as Obama's little speech about taking sacrifices, it was nothing but populist bullshit. Secured debt means you're legally entitled to either the debt maintenance or the assets the debt was collateralized against.

Auto sales are in the shitter (lessening somewhat the desirability of a physical plant that needs updating) and so is the commercial RE market. At this point I think getting 29 cents on the dollar out of a liquidation sale is probably optimistic.

Who's going to buy or lease these properties and with what money and for what purpose? A couple foreign companies might cherry pick a few assets but nobody wants the rest.

Obviously it's worth more than 29cents, otherwise the creditors would've taken that deal. Think about it - is'a in their best interest to recoup as much as they can AND they make living investing in debt. The only feasible asnwer why they didn't take the deal is if the assets are worth more than 29 cents on the dollar.

Unless they are holding CDS that would pay out favorably (supposedly about $3B worth floating around out there), want to strengthen the positions they hold in Ford/GM by knocking Chrysler out of the mix, or both (in addition to getting the 29-33 cent bond payout).

CDSs for both Chrysler and GM were trading at 95+cent a dollar since october, they would've had to own them from waaay back.

How would a debt fund "strengthen position" in some other FI asset by killing the yield on this asset? That just doesn't add up.


What's more likely - secured debt from a firm that went private 2 years ago (which means the debt was issued recently) is well collateralized and worth more than 29 cents... or what you wrote above?

 

[Engineer]

Fiat looks to buy GM's Europe operations and merge with Chrysler to form new company.

:shocked:

 

[Engineer]

Supreme Court blocks sale of Chrysler to Fiat (maybe temporary block)...

 

[CADsortaGUY]

Originally posted by: Engineer
Supreme Court blocks sale of Chrysler to Fiat (maybe temporary block)...

:thumbsup: Maybe the court will restore some sanity and RULE OF LAW to this process. The Admin can't force their will on senior creditors like they tried to and it's nice to see that Ginsburg :Q was the one that handed down the order.

 

[heyheybooboo]

Originally posted by: halik


CDSs for both Chrysler and GM were trading at 95+cent a dollar since october, they would've had to own them from waaay back.

How would a debt fund "strengthen position" in some other FI asset by killing the yield on this asset? That just doesn't add up.


What's more likely - secured debt from a firm that went private 2 years ago (which means the debt was issued recently) is well collateralized and worth more than 29 cents... or what you wrote above?

Chrysler and GM bonds have not been trading at $.95/dollar since the middle of 2007. Last Fall was $.65/dollar (if you were lucky).

The FUD is off the charts in this thread.

Bottom Line: The secured creditors simply want the Gov't to bail them out. They lent money to (in actuality, purchased commercial paper for pennies on the dollar from the people who lent money to) a failing company in hopes of making a huge return.

Originally posted by: CADsortaGUY

Originally posted by: Engineer
Supreme Court blocks sale of Chrysler to Fiat (maybe temporary block)...

:thumbsup: Maybe the court will restore some sanity and RULE OF LAW to this process. The Admin can't force their will on senior creditors like they tried to and it's nice to see that Ginsburg :Q was the one that handed down the order.

The Indiana pension funds bought their $42.5 million in debt in July 2008 for 43 cents on the dollar.

 

[CADsortaGUY]

Originally posted by: heyheybooboo

Originally posted by: CADsortaGUY

Originally posted by: Engineer
Supreme Court blocks sale of Chrysler to Fiat (maybe temporary block)...

:thumbsup: Maybe the court will restore some sanity and RULE OF LAW to this process. The Admin can't force their will on senior creditors like they tried to and it's nice to see that Ginsburg :Q was the one that handed down the order.

The Indiana pension funds bought their $42.5 million in debt in July 2008 for 43 cents on the dollar.

And just what does that change... oh wait... nothing in regards to what I posted.

 

[Engineer]

Supreme court removes block (as expected) - Chrysler sale 'back on'

 

[CADsortaGUY]

Originally posted by: Engineer
Supreme court removes block (as expected) - Chrysler sale 'back on'

:thumbsdown: Watch and see what kind of repercussions this has down the road with other BK dealings... very very bad precedent the gov't is setting here.