The greedy capitalists who lost all of their shares of ownership of Chrysler included public employee unions in Indiana - teachers and police officers. All shareholders got nothing for their ownership shares.
Why take away from these public employees and give to the United Auto Workers? Uh, Mr. President?
Indiana Teachers and Cops vs. Chrysler - BusinessWeek:
As gas prices hovered around $4 a gallon and American automakers watched their pickup-truck and sport-utility sales plummet last summer, investment managers for some 100,000 Indiana teachers, police officers, and other civil servants poured millions of pension dollars into what the funds considered a safe investment: secured debt in Chrysler. Now, as the company speeds toward an exit from bankruptcy court, they are crying foul.The Seattle Times forgets to mention that the pensions that lost are of public employee unions. Posted by Ron Hebron at June 07, 2009 07:32 AM | Email ThisOn Friday, June 5, the Indiana State Teachers Retirement Fund, the Indiana State Police Pension Trust, and the Indiana Major Moves Construction Fund will attempt to block Chrysler's structured bankruptcy and sale to Fiat (FIA.MI) in New York's Second U.S. Circuit Court of Appeals. The group argues that the U.S. government's intervention in the bankruptcy is unconstitutional, since the proposed plan will pay back unsecured lenders before those that were secured. The unsecured creditors and the United Auto Workers contend the sale is fair and is supported by a majority of Chrysler's creditors.
Investments so safe, in fact, that they were able to purchase them for 43 cents on the dollar. That's because last summer, everyone, especially investment managers, already knew that there was a large risk that Chrysler wouldn't be able to pay back their debt. Far from being a "safe investment", this was already known to be a highly speculative gamble -- probably not suitable for the investment of public pension funds.
There's no need to worry about the Indiana teachers and police -- their pensions are safe. This is about the foolish investment managers in Indiana who willfully speculated with pension funds they were supposed to be safeguarding by investing in a company that was already known to be in great financial distress. They took a gamble, hoping to win big, but instead they got burned and now they are whining about it. Boo-hoo... cry me a river.
Instead of taking responsibility for this, they are now grandstanding.
Posted by: scottd on June 7, 2009 08:18 AMThat discount was 43 cents on the dollar!
The proposition that the bankruptcy proceedings are unconstitutional hasn't gone anywhere and won't go anywhere.
The law suit is a political Hail Mary by the State Treasurer, Richard Mourdock.
Posted by: MikeBoyScout on June 7, 2009 08:18 AM
The total owed to the pensions above the normal contributions needed to fund the pensions is approximately 8 Billion dollars, if they stop using as a piggy bank this year. I hope that brings it a little closer to home for the people of Washington because they are the ones who will have to make up the shortfall.
At your next Town Hall meeting with your representatives ask them how they plan to make the State Pension system whole again? How much more in rate increases will we have to pay to make up for their short sighted spending sprees?
Posted by: Smokie on June 7, 2009 08:33 AMIn fact, you can argue that the only way that they would get to keep their money in the first place is with government intervention!
Posted by: demo kid on June 7, 2009 08:54 AMHere's how it works... A troubled company - one having cash flow problems, but with lots of hard assets like property, machinery, etc - approaches you for investment. You can buy $1 of bonds - secured by those hard assets - for just $0.43! So you go ahead and buy a bunch.
Now, 10 months later, the company decides it has to go bankrupt. No problem for you! As a bond holder with a bond secured by the hard assets, you will get at least your $0.43 back, and maybe even more.
But no! The Government decides that your secured debts are NOT secured now, and decides to give the lion's share of the assets to itself (to the Government), the next big chunk to the union, and the balance - about $0.10 on the dollar - to you.
This is done "just because it's fair". You had full rights to the hard assets of the company; that is what the company pledged as collateral for your bonds! But now, you're evil because you want the company and the Government to honor their commitment. You want to at least get out the principle - which was fully backed by secured assets.
Rather, you're vilified and called evil and a speculator.
So, how many of you want to buy a $10,000 CD from Citibank, and then have the Government decide that - for the betterment of Citibank - the Government will now own $6,000 of that CD, the teller's union will own $3,000 of that CD, and you can keep $1,000 of your original $10,000 investment...
Anyone? Anyone? Bueller? Bueller?
Posted by: Shanghai Dan on June 7, 2009 09:23 AMClearly, the government's involvement as a senior secured creditor with Chrysler was bound to have implications beyond what is normal and usual in a bankruptcy proceeding. That being the case, the trustees of the Indiana Pension fund wold have been on firmer legal ground to pursue legal action to prevent Chrysler's management from pursuing government funding in the first place.
But your point about keeping their money is well taken. Had the Pension Fund been successful in preventing government funding in 2008, the value of their investment would have gone to zero with a hasty liquidation.
Mourdock is simply playing politics with a hot button issue.
Posted by: MikeBoyScout on June 7, 2009 09:24 AMInstead, those assets were sold and the investors were able to recover about 30 cents on the dollar, so they lost 30% on their investment. Not so bad considering that stock market investors in general lost more -- but still, it doesn't look too good for pension fund managers who are supposed to be looking for safe investments. Instead of just taking their lumps and moving on, they are playing politics.
The government didn't set the price of this asset sale. The price was what Fiat was willing to pay. If there were any other buyers willing to pay more, I'm sure we would have heard about it.
Nor did the government give any of those assets to the UAW. All of the assets bonded to secure the debt were used to repay debtholders -- it just wasn't enough to repay them at 100%.
Posted by: scottd on June 7, 2009 09:38 AMYour example is nonsensical.
You do know that a "CD" is a certificate of deposit and as such is FDIC insured?
The rights of the insured are clearly available, and absolutely in contradiction to the example you provide.
Read for yourself, and then bring back to us a better example
http://www.fdic.gov/deposit/deposits/insured/index.html
You DO know that the bonds the pension plans bought were secured by the hard assets of Chrysler? Meaning that, if Chrysler failed to pay the bonds OR entered into bankruptcy, they would get back their original investment?
The bonds were SECURED by the assets of the company, and they had first claim on any assets of the company if it was liquidated.
It's the same as if your CD was suddenly re-allocated by the Government; what once was fully secured and insured was now gone.
See, you really DON'T understand, do you? Go learn what a secured debt means, what collateral is, and what an unsecured debtor (the Government and the union) is.
Posted by: Shanghai Dan on June 7, 2009 09:48 AMIt is obvious to frequent readers of this board that you frequently opine before having any understanding of what you are talking about (see comment #10).
Having secured debt does not ever mean 100% recovery. It means you may have a better position than others in a bankruptcy proceeding before a bankruptcy court.
In this particular situation (as the Business Week article articulates) the Indiana State pension fund was in the minority position of senior secured creditors. The judge's decision to put junior claimants in front of senior creditors is regrettable, but absolutely foreseeable and the market priced these securities accordingly.
Bankruptcy proceedings are always a throw of the dice for creditors - and wise investors price this risk accordingly.
The argument against government involvement is a fair discussion, but the culprits are not the evil Obama administration, but the owners and managers of Chrysler who sought government funding in the first place. Ford's management didn't seek direct government funding, and its bonds are doing much better in the market.
Posted by: MikeBoyScout on June 7, 2009 10:03 AMBut as to whether this results in a worse outcome, I'm really struggling to find a scenario that you would favor where things would turn out better. The UAW share is held by their retiree healthcare and pension trust, and is meant to deal with the fact that Chrysler has unmet obligations to them already. The UAW also had to make MASSIVE concessions to get this deal. In the end, it saves jobs, keeps retirees from being completely wiped out, and doesn't exacerbate an already difficult employment situation.
It's also very doubtful that a true liquidation (instead of just a sale to a new company) in the current economic climate would net anything close to 29 cents on the dollar. Who exactly would be buying pieces of Chrysler for more than bargain basement prices right about now? You probably couldn't give away certain divisions.
This isn't a perfect solution, and the legality of it SHOULD be debated. But it's getting amusing to watch conservatives propose that the best solution is complete destruction!
Posted by: demo kid on June 7, 2009 10:09 AMYou really think FDIC insured Certificates of Deposit (CDs) are the equivalent of corporate bonds?
If so, can you explain why anyone would invest money in a non-insured asset class vs. an insured asset class?
What is your position about the legality of the Chrysler management seeking government involvement?
Are these managers personally liable to the bond holders for their actions?
If Chrysler was such a speculative "investment" then why did Obama throw money at them?
Posted by: pbj on June 7, 2009 10:24 AMI think the answer to that question should be obvious. Moondoggie doesn't know how these investments are different. He's just an internet blowhard who likes to call names instead of seriously explaining how the Chrysler debtholders could have collected more than they are getting.
Posted by: scottd on June 7, 2009 10:30 AMObama and the Dems are throwing OUR money at them for the same reasons Bush and the Republicans threw money at them:
(1) To prevent a collapse of the US Auto Industry and thus another negative and expensive shock to a collapsing financial system, and more importantly
(2) Politics; votes, and political contributions.
Dick Cheney said "[GM] had to go through such a dramatic restructuring to have any chance of survival that they had to be able to renegotiate labor contracts and so forth," he said. "And the president [Bush] decided that he did not want to be the one who pulled the plug just before he left office."
SOURCE: http://www.politico.com/news/stories/0609/23283.html
"The argument against government involvement is a fair discussion, but the culprits are not the evil Obama administration, but the owners and managers of Chrysler who sought government funding in the first place.",
So MIKEBOYSCOUT, you told us all that it was tough luck, that Chrysler was a bad investment that would probably lose lots of money. So my question to you is then how do you defend Obama from throwing money at them? The pension fund invested before the government, so the government came along even after it was very obvious Chrysler was a bad investment.
So defend Obama throwing money at Chrysler.
And when you are done with that one, please tell me how liberals hate corporate welfare again.
Posted by: pbj on June 7, 2009 10:35 AMHowever, if you post your phone number, I can put you in touch with someone who has some other surething investments he'd like to sell you.
Posted by: scottd on June 7, 2009 10:38 AM@20 y pbj at June 7, 2009 10:35 AM stated:
"The pension fund invested before the government, so..." is a case in point.
To come to the conclusion that the problem is 'liberals', the writer conveniently ignores that the pension fund in question is a GOVERNMENT run fund for GOVERNMENT employees.
The US Auto Industry has been a slow motion train wreck for 30 years, but it is foolish to blame the anti-free market situation we now find ourselves in on Obama and the Democrats.
It was the Bush administration that created TARP with its limited oversight. Shall any conservative ever forget the sight of Bush Secretary of Treasury on bended knee before Pelosi?
Having spent its years of 2 branch Republican control of government expanding the role of government, is it really any surprise that the Democrats would use those tools for their own political benefit?
Yelling 'Liberal!' at Democrats won't change anything. Physician, heal thyself.
Posted by: MikeBoyScout on June 7, 2009 11:09 AMThat is what US bankruptcy law says should happen. The TARP funds are being used to pay off debts, but not the bonds, with the company's remaining assets sold to Fiat. Its a pretty crappy deal for those pension funds and contrary to US law.
The appeals courts have sided with the administration, thus allowing TARP to trump the bankruptcy laws.
Youa re just assuming that the secured folks who bought at .43 cents are in fact secured by assets that if sold in a liquidation would produce enough money to take care of them.
Also, you don't cite any bankruptcy laws or anything.
It would be more convincing if you put forth actual facts and laws.
Your CD example would show there's no problem at all if the company isn't going to pay you anything if the deal isn't done. In that case, $1000 is better than nothing. You can't just assume the math works out, in other words.
Now MR. Shanghai, you repeat your assumption in post @11. You just ASSUME the value of the assets in a liquidation is enough. And my you seem to be angry when people point this out.
Then you just shut up and go away.
Anotehr thing people need to understand is that in a bankruptcy case that's a reorganization, the judge can modify contracts that are not completed yet. Like those union health care and retirement funds are all wrapped up in labor contracts that could be modified by the bankruptcy judge.
The judge has lots of discretion. He could keep most of those obligations intact, or he could cut them a lot, what he does has an impact on the value of the hard assets as part of a ongoing business (in a sale to Fiat or someone else, or in a reorganization; as opposed to a fire sale. Mr. Shanghai Dan, what you fail to answer is the very apt question of who in hell is going to buy a bunch of car factories in the USA right now. GM -- don't think so. Ford -- um, having trouble staying afloat. The whole industry is selling 10 million cars a year not 17 million so those "hard assets" you're talking about are just a bunch of metal JUNK because you can't use them to make MONEY in the capitalist economy.). Oh anyway, so once you factor in that risk to those hard assets, the position of the secured creditors sucks and they can easily come out BETTER in this deal than if they could block it so that FIAT doesn't buy anything and there's a fire sale.
Come on Shanghai. Who's going to buy a bunch of auto factory buildings? You think Fiat is planning on making money by moving a bunch of tool and die parts over to Italy? You think if they start selling it off piece by piece through the auction liquidation process there's going to be any money left?
The point is, you don't know, you don't have facts, you don't have answers. Your position if it were true, btw, would probably be good grounds for an appeal, too.
You also don't take account of the fact that basically, our bankruptcy law is socialism. I mean come on. The goverment takes it over in the form of a bankruptcy court and approves all major decisions. If that's not government control I don't know what is. But funny thing, this bankruptcy deal is right there in the US constitution.
Very eager to hear your financial statements about Chrysler and the list of its assets and the total compared to the bond amounts that were secured. Thank you.
Posted by: Torture lawyer on June 7, 2009 11:36 AMThe bondholders understand this -- that's why the vast majority of them are agreeing to this deal. They know that they are unlikely to collect more than Fiat's offer. The Indiana pension funds represent a very small portion of the outstanding debt. That's why they have been outvoted -- but that doesn't stop the Republican state treasurer from trying to make political hay out of this event and maybe blow a little smoke to try to cover the poor investment choices of his pension fund managers.
Posted by: scottd on June 7, 2009 11:44 AMIt is NOT the "teachers union" which brought the stay application, it is the Republican Indiana's Treasurer of State, who is the Trustee of the Indiana State Police Pension Plan who has filed for a stay in the bankruptcy proceedings.
SOURCE: http://www.scotusblog.com/wp/wp-content/uploads/2009/06/stay-application-re-chrysler-6-6-09.pdf
"Its a pretty crappy deal for those pension funds and contrary to US law."
It is a crappy deal, but no better deal has been offered.
The contention of the claimants is a very thin two pronged claim. First, that the speed of the proceedings ("the fastest reorganization on record") results in an illegal fiat, and
Second that the US Dept of Treasury acted outside the authority of the TARP legislation; that Treasury needed specific congressional authorization to use funds ICO Chryler's filing.
It is unlikely that SCOTUS Justice Ginsburg is going to rule in favor of the claimants by Monday afternoon, because there is very little in the way of Case Law that supports claimant.
See http://www.scotusblog.com/wp/analysis-big-hurdle-for-chrysler-challenge/ for more in-depth details.
Dan: What were the hard assets of Chrysler Corp worth? How do you know this?
At least $22.7 billion, if you look at the last public report before Chrysler was bought by Mercedes. That's the value of the land, the machinery, the office equipment. If Chrysler went bankrupt, then the bond holders would get paid first when those assets were sold.
Can you point to anyone who was willing to pay more than Fiat did?
That's not the question; Fiat paid to keep the company running, NOT for the assets. They assumed the assets AND the liabilities.
See, in bankruptcy (you can follow along here Torture Lawyer since it's pretty clear you don't understand this process), you either present a plan to restructure and compensate your debt holders in a means that they accept;
OR
You liquidate all your assets and pay out the proceeds, starting with secured creditors first, then working down the list.
What the Obama Administration did is break this process; what the bondholders are doing is suing to keep the process intact.
The bondholders - as secured creditors - have to approve any restructuring plan. And if they don't, then the company assets are sold, and they receive back their funds.
This didn't happen; the Government stepped in, appointed itself the primary creditor (without bondholder or shareholder approval), and then put the unsecured creditor - the UAW - ahead of the secured creditor.
See, it's really pretty simple. You don't take assets that aren't yours! That's called theft. And it's what just happened in the case of Chrysler and GM, by force of the Obama Administration.
But then, leftist Marxists LOVE the Government taking things over! Any fascist (yes, this is REAL fascism, not the stuff you used to scream about with President Bush) action will be cheered and applauded...
So when the banks yank your investments or your CDs and give the money to others, because it's 'the right thing to do' I'm sure you'll all be happy and applaud loudly, right?
MikeBoyScout wrote:
It is a crappy deal, but no better deal has been offered.
Yes. Put the company into bankruptcy, and if need be sell it off, piece by piece. Then give the proceeds to the creditors, starting with the secured creditors first.
No company - no matter how big - is "too big to fail". NO company should be insulated from failure! What the Obama Administration has done is break those fundamental rules of capitalism; apparently, if you get big you will never fail because the Government will make sure you don't fail!
Posted by: Shanghai Dan on June 7, 2009 01:22 PMStill bloviating?
Tell us this, if Chrysler is worth more than the offer on the table, why didn't someone (YOU??) put together an offer 1 cent better and execute it?
FYI - Obama didn't invent TARP, Bush and Paulson did.
ps. Before you give Torture and the rest of us your expert opinion about how bankruptcy works, why don't you at first understand the difference between Chapter 7 and Chapter 11? :-D
Posted by: MikeBoyScout on June 7, 2009 01:54 PMThat is the question the fascist Slavers won't answer!
MikeBoyScout,
Answer Michele's question: how do secured creditors get next-to-nothing, and unsecured creditors come out with the lion's share?
This is a complete travesty of the bankruptcy system and legal system. I'm sure the Obama Justice department will look right into this!
HOPE AND CHANGE!
Posted by: Shanghai Dan on June 7, 2009 02:30 PMYes, calling people who prove you wrong again and again silly inflamatory names certainly proves you to be correct. :-D
I'll gladly answer the question you have re-posted
(and chuckle to myself thinking about why you won't respond to my CD vs. Corp bond question, and why you can't come up with your own question),
when you tell us how much MONEY the secured debt holders are receiving and how much MONEY the unsecured debtors are getting.
Can't do that? We are not surprised. :-D
Posted by: MikeBoyScout on June 7, 2009 02:39 PMGee, I assume you can look up the case for yourself?
Answer Michele's question please: how do unsecured creditors end up with more of the company than secured creditors? How do secured creditors see their share plummet by an order of magnitude, and unsecured creditors rise?
Come on, you can do that! We know you don't understand bankruptcy and the concepts of secured and unsecured creditors, but how about answering Michele?
Posted by: Shanghai Dan on June 7, 2009 03:01 PMYou answer her question Danny Boy.
"We know you don't understand bankruptcy and the concepts of secured and unsecured creditors,..."
Yes, i'm sure you do.
Tell us, have you figured out whether or not Chrysler is in bankruptcy yet, or are you still where you were at 1:22pm (your comment @ #27) saying Chrysler needs to go into bankruptcy. :-D
And Danny Boy, who said "It is better to remain silent and be thought a fool than to open one's mouth and remove all doubt" and why won't you listen? LOL!
We'd all like to see a turn around in 2010, but most of us don't believe in Santa Claus or the Tooth Fairy. Gotta do more than hope and wish and call people names my friend.
Posted by: MikeBoyScout on June 7, 2009 04:17 PM"How does it make you FEEL that I THINK you are a total ignoramus?"
Coming from you, that comment makes me chuckle!
But explain something to us, am i a communist supporter to further the Islamic Terrorists, or an Islamic Terrorist supporter to further the communists? ROFLMAO!
If you think what's happening to Chrysler is standard bankruptcy, then you're really a lost cause... This is a political machination through and through.
In a real chapter 11, the bond holders and stock holders would have had a say in what happened.
In chapter 7, the company would have been liquidated and the bondholders paid back, and if any money left over it would be split up among the unsecured creditors.
So go ahead, answer Michele's question. I know how the unsecured creditors sprung ahead of the secured creditors in this sham of a bankruptcy, but I want to see you say it... Come on, you can admit it was all politics!
Posted by: Shanghai Dan on June 7, 2009 04:53 PMThat said, you've at best forgotten the values and principles of Scouting from your youth if you were a Scout.
Too bad.
Posted by: BA on June 7, 2009 06:25 PMBammy is "spreading the wealth around." Steal from the teachers and police, and the taxpayer will be forced, through higher taxes, to make up the shortfall to the pension fund.
Very simple to figure out if one understands the robber-in-chief.
Posted by: Obi-Wan on June 7, 2009 06:43 PMDanny Boy, @ #42 you said:
"In a real chapter 11, the bond holders and stock holders would have had a say in what happened."
hmmm, first off, there are no stock holders in Chrysler, it is held entirely by a Private Equity firm, Cerberus Capital Management. Secondly, equity is erased in bankruptcy.
Next, let's explore your claim about who has a 'say' and who has had a 'say'.
It would appear that the petition to stay the sale qualifies as a 'say', and 92% of the secured creditors voted for the agreement, so...
goodnight.
Posted by: MikeBoyScout on June 7, 2009 06:47 PM
I didn't think it was wise when Republicans did it so why should I give it a pass when Democrats do it?
GM and Chrysler aren't the entire "domestic" auto industry. In fact, Honda and Toyota are probably more "domestic" than any of the so-called big 3.
"It was the Bush administration that created TARP with its limited oversight. Shall any conservative ever forget the sight of Bush Secretary of Treasury on bended knee before Pelosi?"
It was the DEMOCRAT congress that passed TARP, with its limited oversight. Shall any liberal ever forget Barak Hussein Obama rushing back to Washington to vote for TARP?
Shal any liberal forget Obama'a own $780 billion boondoggle? So once Bush helped Democrats dig us a hole, Obama comes along and digs it even deeper. Now tell me again how this is all Bush's fault?
Posted by: pbj on June 7, 2009 07:25 PM"FYI - Obama didn't invent TARP, Bush and Paulson did."
Lie. It was invented by the Democrat congress in cahoots with Bush and Paulson. It couldn't have passed had not the DEMOCRAT MAJORITY passed it.
So whomever invented it is irrelevant. Who PASSED it is and that would be Democrats and Senator Barak Hussein obama.
Posted by: pbj on June 7, 2009 07:43 PMhmmm, first off, there are no stock holders in Chrysler, it is held entirely by a Private Equity firm, Cerberus Capital Management
BZZT! Epic fail. The owners of Cerberus Capital Management hold the shares for that firm AND all its corporations and entities. There are shares held, just not publicly traded.
Secondly, equity is erased in bankruptcy.
BZZT! Two in a row, boy you're out of it. Equity is NOT erased in a bankruptcy; liabilities are, and equity is liquidated to the point needed for either a reorganization (chapter 11) or full out liquidation (chapter 7).
Hard asset equity belongs to the bondholders in a traditional bankruptcy; the Obama Administration has so corrupted this one that it has damaged not just the holders of Chrysler bonds, but any future corporate bondholders. Who would hold bonds if you know the Administration can - and very well likely will - shuffle the deck and give the equity in your bonds to unsecured creditors?
Posted by: Shanghai Dan on June 7, 2009 08:39 PMAt least $22.7 billion, if you look at the last public report before Chrysler was bought by Mercedes.
Dan, if you truly think Chrysler has assets that can be sold for $22.7B, you are truly a bigger fool than I thought -- and that's saying something. You also don't seem to understand the difference between book value and what assets will fetch if sold in liquidation. Here's a hint: Cereberus didn;t pay anything close to $22,7B when they bought Chrysler from Mercedes.
So whomever invented it is irrelevant. Who PASSED it is and that would be Democrats and Senator Barak Hussein obama.."
Check your civics book. Congress passes laws and the President signs them into law.
What should really irk conservatives is that President Bush and Secretary Paulson sought congressional authority separate from TARP to 'bail out' the auto industry, and the Congress didn't grant it. Bush & Paulson gave the money anyway.
""Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," Treasury spokeswoman Brookly McLaughlin said in a statement."
SOURCE: http://www.moneymorning.com/2008/12/15/tarp-auto/
and Danny Boy....
"If the business's debts exceed its assets, the bankruptcy restructuring results in the company's owners being left with nothing;"
SOURCE: http://en.wikipedia.org/wiki/Chapter_11
Posted by: MikeBoyScout on June 7, 2009 09:33 PMThe assets of Chrysler are worth at least 22.7 billion; probably closer to $40 billion. The assets of GM are worth $80 billion!
You're forgetting - when you buy a company (like Mercedes buying Chrysler, or Fiat buying Chrysler) they get the assets AND the liabilities. If the liabilities are greater than the assets, then the price drops to zero.
See, that's how it works. Thanks for confirming you haven't a clue about what an asset, a liability, and how corporate valuation works!
Posted by: Shanghai Dan on June 7, 2009 09:47 PM"If the business's debts exceed its assets, the bankruptcy restructuring results in the company's owners being left with nothing;"
Thanks for confirming you don't understand that a stockholder (and owner) is different than a bondholder! See, a stockholder has their stock go to zero; a bondholder is one of those creditors!
In fact, if you actually read a bit further you would find on that same page:
Chapter 11 follows the same priority scheme as other bankruptcy chapters. The priority structure is defined primarily by � 507 of the Bankruptcy Code (11 U.S.C. � 507.)As a general rule secured creditors�creditors who have a security interest, or collateral, in the debtor's property�will be paid before unsecured creditors. Unsecured creditors' claims are prioritized by � 507. For instance the claims of suppliers of products or employees of a company may be paid before other unsecured creditors are paid. Each priority level must be paid in full before the next lowest priority level may receive payment.
Guess what? A bondholder is a SECURED CREDITOR who gets paid before any unsecured creditors in a chapter 11!
In fact, here's the relevant section about union contracts in that Wikipedia page:
Some contracts, known as executory contracts, may be rejected if canceling them would be financially favorable to the company and its creditors. Such contracts may include labor union contracts, supply or operating contracts (with both vendors and customers), and real estate leases. The standard feature of executory contracts is that each party to the contract has duties remaining under the contract. In the event of a rejection, the remaining parties to the contract become unsecured creditors of the debtor.
See that part I highlighted? Yes, the labor union contracts should be UNSECURED. Now put that with the parts I highlighted about secured and unsecured, and you'll finally get the idea (if you can follow):
BONDHOLDERS ARE SECURED, COLLATERALIZED CREDITORS AND ARE TO BE PAID BEFORE UNSECURED CREDITORS LIKE LABOR UNIONS.
Thanks for showing the very reference that not only showed you don't know the basics of stocks and bonds, but you don't understand bankruptcy, either!
Posted by: Shanghai Dan on June 7, 2009 09:57 PMjust like the Chrysler dealerships......screw those who didn't support you and reward those that walk the line...
maifiosa and communism.....
people are surprised that the Rats are caught two timing their supporters?...I'm not....they're going have to screw part of their supporters to help the other supporters...
look at the State of Washington...the Washington State Nurses Association boldly supported bama and christine.....now, we have hiring freezes and job cutbacks....now, thousands will be kicked off basic health...Deaconess in Spokane is cutting out its trauma dept.....what's next...
Posted by: lee on June 7, 2009 11:08 PMIn a stunningly unforeseen and dramatic move the Chrysler bankruptcy was upended on Monday with a nearly $40 billion counter offer from Washington state entrepreneur, financial genius and world's greatest arbitrager, Dan _____, a.k.a. Shanghai Dan..
The bankruptcy had been approved on June 1st by the bankruptcy court, but was pending a stay petition set to expire Monday afternoon if not affirmed on appeal by the Supreme Court.
Shanghai Dan's analysis showed that Chrysler, far from being nearly worthless and in need of funding from the US and Canadian federal governments as the entire global financial markets had concluded, to be worth much, much more.
Late Sunday evening Danny Boy announced "The assets of Chrysler are worth at least 22.7 billion; probably closer to $40 billion."
With the nearly $40 billion dollar offer put together by Dan, secured creditors shall recover 100% of the $6.9 billion owed them. Indiana State Treasurer, Richard Mourdock, who had appealed the ruling of a federal bankruptcy court on May 31, could not be reached for comment, but sources report him to be very happy.
Shanghai Dan's offer not only makes whole the secured creditors, but is sufficient to repay the UAW the unsecured $10.5 billion it is owed and the $7 billion Chrysler owes the U.S. taxpayer, and after it is all done
Shanghai Dan's analysis shows he, GENIUS SHANGHAI DAN, gets to pocket nearly $15.5 billion!
Why nobody other than Shanghai Dan was able to realize such HUGE profits from Chrysler since it came into financial trouble nearly 8 months ago is a financial mystery for the ages, but readers of the political blog, Sound Politics, understand that Danny Boy is so much smarter than everybody else, because he says so nearly every day.
I see you can't refute the facts that PROVE you wrong; the very facts you turned up! So you turn to mockery...
Great, I'll take that as your acknowledgment that you're wrong. Enjoy eating your crow!
Posted by: Shanghai Dan on June 8, 2009 07:43 AMjust like the Chrysler dealerships......screw those who didn't support you and reward those that walk the line...
It's even worse than that... You'll pay more for those cars, because of restricted competition. It's bad enough that the Government is forcing us to pay for these companies that should die, but if you ever want to buy from them you'll get the "pleasure" of paying considerably more to the remaining "Obama Pleasing" dealers!
Not just eliminating competition for their political enemies, but making sure it's done in such a way that the buying public has to support their chosen ones!
It should't be HOPE AND CHANGE!
It should be DISPAIR AND STAGNATION!
Posted by: Shanghai Dan on June 8, 2009 07:57 AMDanny Boy, understand your busy dotting the 'i's and crossing the 't's on your way to pocketing $15+ billion dollars, so it is understandable you are a little groggy this morning.
Let me try and straighten you out.
At #52 Shanghai Dan at June 7, 2009 08:39 PM
you said:
"BZZT! Two in a row, boy you're out of it. Equity is NOT erased in a bankruptcy; liabilities are, and equity is liquidated to the point needed for either a reorganization (chapter 11) or full out liquidation (chapter 7)."
And then i simply thru the Wikipedia entry to you refuting your elegantly worded but factually incorrec ""BZZT!" . I'm very glad you could read it, but what you posted about secured creditors does not dispute that equity can get erased in Chapter 11.
About eating crow Danny Boy.... did you not post that YOUR analysis shows Chrysler to be worth close to $40 billion? (See your post at #56)
Amazing! You are just going to leave $15 billion on the table????
One last fact for you Danny Boy.
In the likely event that Ginsberg doesn't decide on her own to throw Mourdock's appeal to the Supreme Court, it only takes 4 members of the court to get Certiorari.
Four - Scalia, Thomas, Roberts and Alito.
Think it'll happen?
I don't.
But hey, do us all proud. Prove me wrong and go and get your billions. Else, type away your dreams of grandeur. :-D
PS - what's your status on proving your first post on this thread that CDs are the same as Corporate Bonds???? too funny!
Posted by: MikeBoyScout on June 8, 2009 08:00 AMAnd then i simply thru the Wikipedia entry to you refuting your elegantly worded but factually incorrec ""BZZT!" .
You did? Funny, I must have missed that... Which post was that? Because I posted the tear-down of your ignorant attempt to use Wikipedia to bolster your own position, then you came back with sarcasm. So much for your refutation!
But good try to change the subject, BoyMikeIsDumb! You've been shown to be wrong about your understanding of the difference between secured and unsecured creditors.
So how about showing why an unsecured creditor should get ten times as much as a secured creditor? Please, show the law, or case history, or even reference where that is the legal approach to bankruptcy. Please, do so!
See, the fundamental issue you're trying to avoid is that this was a grab of assets from secured bondholders (in this case, it included a few State pension plans) and given to unsecured creditors (the UAW) for political payback.
So tell me: by what law does the secured creditor get paid back AFTER the unsecured creditor? Come on, you can do it!
Wait, maybe you can't because THAT'S NOT THE LAW.
Not that law matters one whit to you Marxist fascists with your fascist leader, the Obamassiah!
DESPAIR AND STAGNATION!
PS:
PS - what's your status on proving your first post on this thread that CDs are the same as Corporate Bonds???? too funny!
Apparently metaphors and similes are lost on you. No surprise, really...
Posted by: Shanghai Dan on June 8, 2009 09:16 AMAbout eating crow Danny Boy.... did you not post that YOUR analysis shows Chrysler to be worth close to $40 billion? (See your post at #56)
Please show in post 56 where I stated that Chrysler was worth $40 billion. Please. Do so, and I will humbly leave. In fact, I will donate $1,000 to the re-elect Jim McDermott fund in your name! Please show where I stated Chrysler was worth $40 billion!
Barring that, you are nothing more than a knee-jerk Slavery Party hack liar or a low-grade moron who can't understand basic English (my bet is that it's a combination of the two).
Come on, Mike, do it - show me! Take me up on it! In fact, I'll even copy my post here so you don't have to scroll back up:
The assets of Chrysler are worth at least 22.7 billion; probably closer to $40 billion. The assets of GM are worth $80 billion!You're forgetting - when you buy a company (like Mercedes buying Chrysler, or Fiat buying Chrysler) they get the assets AND the liabilities. If the liabilities are greater than the assets, then the price drops to zero.
See, that's how it works. Thanks for confirming you haven't a clue about what an asset, a liability, and how corporate valuation works!
You can do it, Mike! Come on, give it your best shot! You can show your ignorance here once again, definitively, for all to see! If I stated that Chrysler was worth $40 billion in that post, you show me where I said it. Please!
Now, when you fall through and fail to do this, you will be laid wide open, shown to all the world as a fraud, a charlatan, a liar. In the words of Clark W. Griswold, you are a:
Posted by: Shanghai Dan on June 8, 2009 09:28 AM
cheap, lying, no-good, rotten, four-flushing, low-life, snake-licking, dirt-eating, inbred, overstuffed, ignorant, blood-sucking, dog-kissing, brainless, dickless, hopeless, heartless, fat-ass, bug-eyed, stiff-legged, spotty-lipped, worm-headed, sack of monkey shit.
Obama's intervention where the executive branch does not belong and tinkering with problems that already have well-established solutions like bankruptcy, has shot one of his favored constituencies (teachers unions) in the foot to save the other (UAW workers). In the process he is hosing both the teachers unions and the UAW by tampering with things he knows nothing about (business).
Wouldn't it have been be more politically shrewd for Obama to let the system work and stay politically neutral where he belonged? Unless his overarching purpose is to seize and consolidate economic power for himself, what could be his purpose in playing one hugely important portion of the electorate off against the other?
Dan is a fool who thinks Chrysler assets could be liquidated for $22B or more! Nobody with actual information regarding Chrysler thinks this -- not even any of the creditors.
Dan likes to spout nonsense about assets and liabilties, but he clearly has no idea of how accounting rules cause assets to be carried on the books at values that usually have nothing to do with their liquidation value. He's probably never heard of intangible assets, impairment, or good will -- accounting terms that affect the book value but mean nothing to a liquidation buyer. He doesn't seem to know that tooling for producing PT Cruisers is valuable to Chrysler (and shows up in their book value) but is worthless except for scrap metal to someone else.
Dan seems to think bankruptcy is a magical process whereby all assets can suddenly be sold for their full book value and all liabilities completely disappear. Maybe he can explain to us how the buyer of a useless assembly plant can avoid the decommissioning costs and environmental liabilities associated with that property. That would be entertaining at least.
Like I said, it's useless to argue with such a child. But it can be fun to poke him once in a while to see what kind of nonsense he'll spew. Arguing that Chrysler's assets can be sold for somewhere between $22.7 - 40B is a beaut -- but I'm sure we won't have to wait long for him to surpass even that.
Posted by: scottd on June 8, 2009 09:34 AMWhat time today will you be making the announcement that you can get >$40 billion for Chrysler??? :-D
You so sweetly asked:
"So tell me: by what law does the secured creditor get paid back AFTER the unsecured creditor? Come on, you can do it!"
The answer is none; no section of bankruptcy law allows the company to come out of bankruptcy until all debt is adjudicated.
The priority of which (secured creditors v. unsecured) is clear in the law, but so is the ambiguity. Notice Danny Boy in the synopsis from Wikipedia you posted, the words 'must' and 'shall' are not used, but words like 'if' and 'should' are used. That's because once a company files for bankruptcy the judge gets to make those decisions.
In the case of Chrysler, 29 cents on the dollar with no equity for the $6.9 billion was the best they could get, and 98% of the bond holders agreed because it was the best they could get.
Why? Because cash in the hand is worth more to over leveraged investors than equity.
Well, until you're offer of $40 Billion appears....
See, the reason the OWNERS of the company came to the Government hat in hand was because NOBODY ELSE was willing to offer Chrysler any sort of bridge financing.
And you may ask, 'why didn't Mourdock's pension fund argue this appeal earlier?'
One word Danny Boy - Greenmail. Mourdock gets any sort of delay and he holds the deal up for prefered treatment.
But, of course, an experienced multi-billion dollar deal maker like yourself already knew that.
:-D
Now you get out there and scream 'MARXIST' from the trees to stop all this - cuz that's worked so well so far. ROFLMFAO!!!!!
Posted by: MikeBoyScout on June 8, 2009 09:41 AMYou asked:
"Wouldn't it have been be more politically shrewd for Obama to let the system work and stay politically neutral where he belonged?"
Maybe. Send a note to GWB and ask him why without specific Congressional authority he asked for and Congress didn't provide he and Paulson handed Obama and the Dems the hammer and the anvil to crush the bond holders.
Regarding the Policemen whose pension fund gets dinged in all of this, send a note to Mourdock in Indiana and ask him what his team was thinking when they purchased the bonds at nearly 60% below par.
For all of you 'MARXIST!' 'SOCIALIST!' screaming ninnies, any of you buy Chrysler debt when it was selling at such a discount?
If yes, have you filed an amicus brief to the Indiana State pension fund claim?
Or maybe your experience in bond arbitrage is solely limited to your musings on the internets?
How bout it Mr./Mrs. Amused By... you own any Chrysler debt? Ever have?
@ 68 MikeBoyScout wrote: "Send a note to GWB and ask him why without specific Congressional authority he asked for and Congress didn't provide he and Paulson handed Obama and the Dems the hammer and the anvil to crush the bond holders."
No thanks. You send the note; evasion and self-delusion is your bag . . . not mine.
Thanks for the relevant and rational response from you though.
I knew you could do it.
See GAP for valuation of fixed assets like real estate and large tooling. If there's a problem with the price of the assets, then take it up with the GAP, the auditors, and with the CPAs at Mercedes. Apparently they were worth a lot at one time, and I'd suggest they are worth a LOT more than the $2 billion that's being spread over the creditors.
BoyMikeIsDumb,
About eating crow Danny Boy.... did you not post that YOUR analysis shows Chrysler to be worth close to $40 billion? (See your post at #56)
You claimed I said it. You've ignored my response. Come on Mike, show where I stated that. Go ahead, be a man (oh, that's right, you're a boy - and a sorry excuse for one as well).
I'll take your silence on the issue as your tacit admission that you had your cranial structure firmly ensconced within your colon, once again...
Posted by: Shanghai Dan on June 8, 2009 10:22 AM"You claimed I said it. You've ignored my response. Come on Mike, show where I stated that. Go ahead, be a man (oh, that's right, you're a boy - and a sorry excuse for one as well)."
Danny Boy, you keep setting 'em up, and i'll keep knocking 'em down :-D
"56. Scottd,
The assets of Chrysler are worth at least 22.7 billion; probably closer to $40 billion. The assets of GM are worth $80 billion!
You're forgetting - when you buy a company (like Mercedes buying Chrysler, or Fiat buying Chrysler) they get the assets AND the liabilities. If the liabilities are greater than the assets, then the price drops to zero.
See, that's how it works. Thanks for confirming you haven't a clue about what an asset, a liability, and how corporate valuation works!
Posted by Shanghai Dan at June 7, 2009 09:47 PM"
You are pure GENIUS!!!!! LMAO
ps - any idea what the Chrysler Liquidation value analysis showed? No, of course not! Facts don't enter your analysis, do they Danny Boy?
Get a friend to help you read it.
http://chapter11.epiqsystems.com/viewdocument.aspx?DocumentPk=d7df6b40-7615-4bb1-82e8-31bacc491751
SOURCE: http://europe.autonews.com/article/20090528/ANA02/905289958/-1
"Senior lenders are owed $6.9 billion and would receive $2 billion, or about 29 cents on the dollar, under the [approved bankruptcy] plan."
SOURCE: http://www.marketwatch.com/story/chrysler-fight-goes-to-us-supreme-court-journal
But Danny Boy KNOWS Chrysler is worth much more!
:-D
Dogged unthinking loyalty to an empty symbolic cause is always easy.
And for some it is emotionally rewarding.
Its also the seedling of Fascism.
Nice job defending your views MikeBoyScout.
Posted by: Amused by Liberals on June 8, 2009 11:20 AMGreat - no answer. You said I claimed Chrysler is worth $40 billion, and you simply can't prove it. Suck it up, you're a liar or ignorant. Your choice!
Posted by: Shanghai Dan on June 8, 2009 11:20 AMGreat - no answer. You said I claimed Chrysler is worth $40 billion, and you simply can't prove it. Suck it up, you're a liar or ignorant. Your choice!
Posted by: Shanghai Dan on June 8, 2009 11:21 AMWhen you have no facts or reason supporting your position, only emotion, then you must resort to the typical tactics of liberals!
Make a claim - a flat out, provable lie - then stick to it, or dodge it completely. It's what liberals do...
Posted by: Shanghai Dan on June 8, 2009 11:24 AM"56. Scottd,
The assets of Chrysler are worth at least 22.7 billion; probably closer to $40 billion. ....
Posted by Shanghai Dan at June 7, 2009 09:47 PM"
That ain't you?
Posted by: MikeBoyScout on June 8, 2009 11:25 AMYou claimed at #56 that "The assets of Chrysler are worth at least 22.7 billion; probably closer to $40 billion"
I have provided the both the Liquidation Analysis link, and a link to a news story reporting it.
I'll wager what ever your meager net worth is that before 1pm this afternoon you offer NO FACTS to support a claim of a Chrysler valuation in June 2009 of "at least 22.7 billion".
troll
Posted by: MikeBoyScout on June 8, 2009 11:34 AMYou actually don't see the trap you fell into?
Amusing
Posted by: Amused by Liberals on June 8, 2009 11:52 AMPlease explain how a company's net worth - its value - is set only by the assets and not the liabilities.
This should be fun!
Posted by: Shanghai Dan on June 8, 2009 12:18 PMYeah, and after you explain it to me, let the people in the dictionary business know your NEW DEFINITION of Net Worth.
"Net Worth -
The amount by which a company or individual's assets exceed their liabilities."
SOURCE: http://dictionary.reference.com/browse/net%20worth
m a r o o n
Posted by: MikeBoyScout on June 8, 2009 12:25 PM
Wow, Chrysler was worth $36 billion when purchased by Mercedes (which is what I referenced back in post 27, when I said they had hard assets of at least $22.7 billion); it was worth $7.4 billion less than 2 years ago (SOURCE).
Now, can you explain to me what the difference between corporate worth, corporate assets, and corporate liabilities are, and how they are inter-related?
Maybe then you'll understand why you sound like a drool-laden buffoon!
Posted by: Shanghai Dan on June 8, 2009 12:26 PM"Net Worth -
The amount by which a company or individual's assets exceed their liabilities."
Good boy, Mikey! Now, do you know what an asset is? Do you know what a liability is? Come on, you used the dictionary for the phrase "net worth"... Now show us you can look up asset and liability!
Oh, and while you're at it, can you point to ANYWHERE here where I said the net worth of Chrysler was $22.7 billion, like you continue to lie about?
Posted by: Shanghai Dan on June 8, 2009 12:29 PMI asked you to show me analysis of Chrysler's worth in June of 2009, and the best you can do is offer "it was worth $7.4 billion less than 2 years ago "
Two years ago Chrysler wasn't in bankruptcy.
Two years ago their execs weren't begging for tax payer money.
Funny how valuation changes from day to day.
Two years ago the DOW closed at 13,424. 3 months ago it closed at 6,547. Today it is trading at 8,803. Valuations change over time. Go figure!
I gotta run Danny Boy, but please don't forget to notify all the dictionary people of your new definition of net worth.
m a r o o n
Posted by: MikeBoyScout on June 8, 2009 12:33 PMThanks for the corrections.
Posted by: deadwood on June 8, 2009 12:34 PMShanghai Dan - pat yourself on the back, you have been right all along. But you already knew that I suspect.
Posted by: pbj on June 8, 2009 01:33 PM"To prevent a collapse of the US Auto Industry "
So please tell us all exactly how selling off Chrysler to Fiat is preventing a collapse in the US Auto Industry. Do you even read what you type?
Posted by: pbj on June 8, 2009 01:36 PMYou got me. My prediction that SCOTUS would let the appeal through today was wrong.
@88 pbj,
Yes, i read what i type.
i don't necessarily agree with what i report.
Per the one CEO that didn't come to Congress with his hand out
"Ford Motor Co. CEO Alan Mulally said if one of the automakers failed, the whole industry could be disrupted."
SOURCE: http://ceoworld.biz/ceo/2008/11/19/robert-nardelli-rick-wagoner-and-alan-mulally-trio-plead-for-aid/
Posted by: MikeBoyScout on June 8, 2009 03:22 PMI asked you to show me analysis of Chrysler's worth in June of 2009, and the best you can do is offer "it was worth $7.4 billion less than 2 years ago "
Why should I answer? That wasn't my contention nor a statement I made. I did say (back in post 27) that Chrysler had hard assets worth $22.7 billion when Mercedes bought them! Apparently you believe that transfers forward until today, as if net worth doesn't change over time.
I gotta run Danny Boy, but please don't forget to notify all the dictionary people of your new definition of net worth.
Funny, I haven't redefined net worth at all! Apparently, you have though, taking a statement about assets to mean net worth! Funny, net worth isn't assets, and apparently you don't understand that (well, until you read the dictionary and realized you were, in fact, a mouth-breathing knuckle-dragger).
Oh, and you still haven't shown you understand what an asset is, or what a liability is. But you did parrot the dictionary for the definition of net worth - which proved I was correct!
But anyway, I'm still waiting for you to show where I said Chrysler was worth $22.7 billion! Unless, of course, you were wrong or lying? Which was it? Or are you going to forgo that $1000? Heck, show where I said Chrysler was worth $22.7 billion and not only will I donate $1000 to Jim McDermott, I'll give you $1000 in cash or silver - your choice!
Want to make an easy grand? Go ahead, prove what you claim. I know you can't because I never said what you claim. So you're about as hollow as ben wa ball, but much less useful!
Posted by: Shanghai Dan on June 8, 2009 03:35 PMShanghai Dan - pat yourself on the back, you have been right all along. But you already knew that I suspect.
Well, it was the only thing the SC could do, if they actually stand for the rule of law! Note too that the stay was executed by easily the most liberal member of the Court, Ruth Bader Ginsburg. When even Justice Ginsburg says the situation is going sideways, you KNOW the Administration is way out in left field!
What's amazing is that all the fascist liberals on this board were all for the Obama Administration simply ignoring the rule of law and dictating what it wanted to happen. Nationalization - fascism - is their goal, and now it's been exposed, rendered naked for all to see.
Anyway, kudos to the Supreme Court and Justice Ginsburg for actually FOLLOWING THE LAW and forcing the Administration and its lackeys in the Obama Justice Department (that's an Orwellian phrase) to follow the law as written.
Now if we can get the idiot "Boy Scout" to learn what assets, liabilities, and net worth really are, he could understand this issue to more than a 1st grade level!
Posted by: Shanghai Dan on June 8, 2009 03:41 PMShanghai Dan nailed the issue at #7. How many want to buy a $10,000 CD from Citibank (guaranteed secure) only to find the government arbitrarily decides it's only worth $1,000. What's a guarantee if the President may simply abrogate the law for political purposes?
@ 13 MikeBoyScout wrote: "[t]he culprits are not the evil Obama administration, but the owners and managers of Chrysler who sought government funding in the first place . . . "
Apparently according to MikeBoyScout, the owner/culprits (mostly LIBERAL stockholders - including some 100,000 Indiana teachers, police officers, and other civil servants) who poured millions of pension dollars into funds contractually guaranteed to be safe/secured debts in Chrysler should be illegally screwed out of their money by Obama simply because managers of Chrysler sought government funding? These people had primary lien status until Obama removed it, and the owners and managers of Chrysler had nothing to do with making that happen.
Thousands of teachers, police officers, and other civil servants may deserve a personal screwing for politically supporting Obama for Prez, but the Federal Government has no business stealing their money by meddling with car companies or tampering with pension funds especially for the purpose of rewarding UAW workers. This political patronage scam is one of many things Obama and his people are doing that will rebound against his future political fortunes badly. It reveals Obama's political naiveté and extremism and demonstrates in clear terms how liberalism seriously hurts real people.
Ron's "Favored Union" post has effectively established that liberal socialist style government intrusion into the lives of American's hurts everyone including liberals, and MikeBoyScout shows how liberals justify government intrusion. Soon because the court has decided to look at the issue, it will allow voices of reason the proper time and opportunity to discuss what this example of Obamunism means for every American.
I think that Justice Ginsberg only issued a stay today, she did not rule on the major issues, and the USSC did not rule on the major issues as you seem to think.
Could you give us a link to show this is wrong
?
Could you cite the part of the USSC opinion that says the administration or Chrysler did something illegal?
Could you tell us which judge wrote the opinion and which ones signed it and which ones dissented?
BTW I couldn't follow this notion that the secured creditors somehow get a "share" of the company?
Since, as you point out, they get the value of their security, which is supposed to be sold?
So if the hard assets are sold, um, what's left to have a company with to have a share in anyway?
And you haven't told us why the bankruptcy judge approving this is doing it. Do you have his opinion discussing all these issues? Doesn't he have a right to cram down secured creditors or something, it's right there in the banktruptcy law? I'm not sure I understand what that means or how these creditors groups vote and stuff. But I know they vote. Which means, YOU CAN BE OUTVOTED. Which means, YOU CAN BE OUTVOTED ON A PLAN IN THE BEST INTEREST OF THE COMPANY INCLUDING PROVISIONS FOR KEEPING ONGOING VALUE TOGETHR, SELLING TO SOMEONE LIKE FIAT, KEEPING EXECUTORY CONTRACTS IN PLACE 9THE UAW WILL STILL SHOW UP FOR WORK) AND GETTING CONCESSIONS IN EXECUTORY CONTRACTS, WITH PROVISION FOR SECURED CREDITORS TO GET SOME MONEY AND SOME SHARES AND NONSECURED TO GET SOME SHARES AND SOME CONTRACTING PARTIES TO STAY INVOLVED.
Anyway, all I know is there's something called a cramdown (wow, that sounds bad, right?) on creditors and they have a vote ... which of course means that you can get outvoted and thus lose your rights but it's all in the banktruptcy law to being with so you really didn't have any absolute rights in that regard, right?
Please explain.
Oh btw, am still waiting for the other explanation -- doesn't the Second Amendment in protecting all arms mean that you, Mr. Shanghai Dan, have to have the unfettered right to own or keep and even bear (!!!) a hydrogen bomb?
Second Amendment ain't got no cram down provision taking away your rights, you see.
Anyhoo, thanks for chatting.
"That gives the Indiana pensioners only 29¢ on the dollar. The deal now prioritizes payments to junior creditors, such as the United Auto Workers--which is to receive 55% of the company's equity and a $4.6 billion note in exchange for a $10.6 billion claim."
That sounds like the UAW isn't getting any cents on the dollar right now, they are just getting an equity share of the newco and a promise to pay, that note. Whereas the IN pensioners are getting cash.
So doesn't that mean the IN pensioners (and presumably other secured debt) is being put first?
If anyone has the real facts chime in, it's hard to tell what's going on without reading a lot of court files.
Anyway that equity and that promise to pay for the UAW might end up being worth zip. 29 cents in hand could be worth more than any amount of paper.
Posted by: Torture again on June 8, 2009 07:41 PM"That gives the Indiana pensioners only 29¢ on the dollar. The deal now prioritizes payments to junior creditors, such as the United Auto Workers--which is to receive 55% of the company's equity and a $4.6 billion note in exchange for a $10.6 billion claim."
Then you said:
That sounds like the UAW isn't getting any cents on the dollar right now, they are just getting an equity share of the newco and a promise to pay, that note. Whereas the IN pensioners are getting cash.
So doesn't that mean the IN pensioners (and presumably other secured debt) is being put first?
Umm, no. The lion's share of the payout is going to junior creditors like the UAW. That's what the BusinessWeek article quote says.
The junior creditor gets a $4.6 billion note (which would be a negotiable instrument) and 55% of the equity (meaning 55% of the assets) of the company. That's at least 43.3% payout (on the negotiable note), if you set the equity ownership to zero.
Meanwhile, those secured creditors are getting 29%. Now, I only minored in math at the university, but I'm pretty sure that 43.3% is greater than 29%!
Unless you know otherwise?
Posted by: Shanghai Dan on June 8, 2009 09:02 PMDan: I think you mean GAAP (Generally Accepted Accounting Principles). Man, you are some kind of business expert!
I'd suggest they are worth a LOT more than the $2 billion that's being spread over the creditors.
Actually, you were suggesting they were worth somewhere between $22.7B and $40B...
Just to recap: An army of analysts working for the debtors, creditors, and potential purchasers of Chrysler -- folks who have total access to Chrysler's books -- can't find $22.7B of salable assets, let alone $40B. But Shanghai Dan can! That's because he read an annual report from 12 years ago -- and he knows about assets and liabilities and stuff! He's a real M&A genius!
HOPE AND CHANGE! Not...
Posted by: Shanghai Dan on June 8, 2009 11:27 PM1. No, you're not getting my question.
29 cents CASH is more than and is COMING FIRST compared to a NOTE or EQUITY. Because cash is cash -- you get paid. A NOTE you might not get paid! It's got a RISK OF NONPAYMENT. and EQUITY -- my god, we all know that could turn to zero.
Now I'm not following all this as closely as you are, you seem to be the expert, but you would agree that getting CASH is MORE CERTAIN THAN A PROMISE TO PAY OR A SHARE IN EQUITY WHICH CAN GO DOWN TO ZERO CENTS PER SHARE.
If I'm wrong, please explain. Like if the UAW is actually getting CASH -- by all means let me know. Thanks!!
2. You seem to be really wrong when you say this: "Umm, no. The lion's share of the payout is going to junior creditors like the UAW. That's what the BusinessWeek article quote says.
The junior creditor gets a $4.6 billion note (which would be a negotiable instrument) and 55% of the equity (meaning 55% of the assets)"
No, no no!!!! The equity is worth what it gets on the open market -- pretty much zero right now. And it's a right to future profits -- which we don't know if there will be any!!! And it's a share in teh liquidation value after all the assets are TAKEN AWAY BY ANY SECURED CREDITORS -- my god Shanghai Dan that was your main point, have you forgotten yourself??? -- and after ALL DEBTS HAVE BEEN PAID.
Now that note you refer to is only a promise to pay. Sure, it's negotiable! Tell us how much someone wants to pay for it?
of the company. That's at least 43.3% payout (on the negotiable note), if you set the equity ownership to zero.
3. Then you say somethingg else that makes NO SENSE AT ALL!!! You say "Meanwhile, those secured creditors are getting 29%. Now, I only minored in math at the university, but I'm pretty sure that 43.3% is greater than 29%!" The 43% is what they paid for their secured bonds and the 23% is what they are getting now. So that's a loss of over 20 cents on the dollar and yes, 23 is less than 43!!!!!!! Hallelujah, your finance skills are spot on. but the comparison is irrelevant because you are trying to argue the UAW is getting more than the secured creditors and the UAW isn't getting the 43 % so your comparison JUST MAKES NO SENSE AND IS LIKE TOTALLY RETARDED. As noted above, the UAW isn't getting any cash so the comparison is:
--IN pensionsers and other secured bondholders getting lots of CASH
--UAW getting NO cash.
Last I checked, LOTS OF CASH IS MORE THAN NO CASh.
4. And then now we come to your legal analysis and that of other gleeful commenters who seemed to think that a one paragraph temporary stay by Ginsberg was a validation of your fundamental arguments.
I have to ask, are you guys just completely clueless? did you really think her one paragraph stay order was a ruling that your arguments were correct (the whole thing is unconstitutional, illegal, usurpation of power, it violated the banktruptcy laws, and it left the secured creditors worse off and dealt with them unfairly etc.).
The supreme court just let the sale to Fiat go through, so obviously you were all wrong you had no clue and more, your basic arguments are wrong because if they had merit the court would have taken the case for a full review.
Now, don't you think a court with Justice Roberts would accept your positions if they were valid?
And I'm still waiting to find out if you guys think the Second Amendment preserves your right to rocket propelled grenades. You know, if you had one of those you could just go to DC and get really close...well, you know what I mean!
Have a great day. Oh and btw isn't great that our wonderful court issued the stay and let the IN pensioners make their request for a bigger stay to the full court, I think this court acted very responsibly in giving them that hearing on whether to have a full hearing.
that's very due process right?
"
Posted by: Torture Lawyer on June 10, 2009 05:06 AM"Justice Ginsburg opted to share the postponement question with her colleagues, and the Court appeared to be unanimous in letting the sale occur with a massive infusion of money from the U.S. government, plus a contribution from the Canadian government, to keep Chrysler from what they said was imminent collapse."
SOURCE: http://www.scotusblog.com/wp/court-clears-chrysler-sale/
"The treasurer estimates the Chrysler bankruptcy will cost state police, firefighter and teacher pension funds $6 million, plus an additional $2 million in legal fees spent on the court battle"
SOURCE: http://www.wibc.com/news/Story.aspx?ID=1101841
In the biz, it's known as good money after bad.
Posted by: MikeBoyScout on June 10, 2009 02:21 PMThis whole thread proves the bankruptcy of the right wing commenters. They got the deal wrong, they got the law wrong, they got the supreme court outcome wrong, you guys just don't know what the hell you're talking about.
Hey I gotta negotiable note I want to sell you, it's for $40 million dollars and I'll sell for just one cent on the dollar.
It's signed by my cat, too! And I know where to get more of these notes. I also have shares of HisCAtCo equity you can buy 1,000,0000 shares for just a dollar a share.
Posted by: Torture Lawyer on June 10, 2009 02:40 PMIn the free market of ideas, this means the notion this was a raw deal the end of bond law and order and such was all a fairy tale proposed by knee jerk right wingers.
And come on guys, the Second amendment says you get the right to keep and carry arms so that means hydrogen bombs and RPGs, right?]
I mean, you would want a supreme court judge who wasn't all activist because an activist judge would read those plain words to find some damn way to keep us from being able to have hydrogen bombs, and that would mean we couldn't have freedom and liberty anymore, because after all, isn't it important for citizens to have hydrogen bombs in case the government becomes tyrannical?
The silence says it all.
Posted by: Torture Lawyer on June 11, 2009 12:42 PM