5/02/2009

Excellent piece on the lenders who stood up against the government stealing their money

Great piece by Rick Newman. Please read the entire piece here.

Hooray for Chrysler’s Rogue Creditors
May 01, 2009 10:46 AM ET | Rick Newman | Permanent Link | Print
One rap against President Obama is that he never gets mad. The Chrysler bankruptcy may have proven otherwise.

When Obama singled out “investment firms and hedge funds” that wouldn’t agree to restructure Chrysler’s debt on the government’s terms, his scorn was palpable. “I don’t stand with them,” he said pointedly. “I don't stand with those who held out when everybody else is making sacrifices.”

[See why Chrysler still might not survive.]

The president was referring to a group of financial firms that hold a big chunk of Chrysler’s $6.9 billion in debt. Some of Chrysler’s creditors agreed to take 33 cents on the dollar and let Chrsyler off the hook. But other creditors said no to that deal, gambling that they’d get more from a bankruptcy judge. They may be right: Fitch Ratings estimates that bondholders could get 50 to 70 percent of their money back if Chrysler liquidates, and a bit less if Chrysler emerges as a going concern. In either case, that’s a better outcome for creditors than the 33 percent return they would have gotten under the government’s offer.

On $1 billion in debt, the difference between a 33 percent and a 50 percent redemption is $170 million. On the whole $6.9 billion in debt, the difference would be almost $2 billion. Sure, some of that accrues to rich investors who can probably afford the haircut, but much of the money is invested on behalf of pension funds, mutual funds, and the retirement accounts of ordinary Americans. Should they really accept a deeper loss because the government asked them to? . . . .

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3 Comments:

Blogger be603 said...

Headline, "Chrysler Bondholders go Galt."

5/02/2009 2:36 AM  
Blogger 1 said...

Rush Limbaugh had some very interesting comments (well at least I thought so) regarding what's happening at Chrysler...

Obama Views Chrysler Deal as Vehicle to Achieve Social Justice(here's a small portion)

For example, "Peter A. Weinberg and Joseph R. Perella are part of a band of Wall Street renegades -- 'a small group of speculators,' President Obama called them Thursday -- who helped bankrupt Chrysler. That, anyway, is the Washington line. ... But now the two men, along with a handful of other financiers, are being blamed for precipitating the bankruptcy of an American icon. As Chrysler's fate hung in the balance Wednesday night, this group refused to bend to the Obama administration and accept steep losses on their investments while more junior investors, including the United Automobile Workers union, were offered favorable terms." I told you, explained all this yesterday. This is like how it's done in Argentina. The bondholders get the shaft, the banks get the shaft, and the union owns the company...

J. Robert Smith over at the American Thinker has this nugget: Amtraking Automakers

5/02/2009 5:34 AM  
Blogger Dad29 said...

Umnnnhhh...

In the case of State, Local, and Educators' retirement funds which are 'fixed benefit,' it is irrelevant EXCEPT to the taxpayers who will have to make up the difference.

5/02/2009 10:19 AM  

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