Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (35560)	5/18/2009 4:01:47 PM
From: TimF	Read Replies (1) \| Respond to of 71588

However, from a LEGAL point-of-view, the priority goal is to craft a VIABLE BUSINESS The law can say something should be the primary, even overriding goal, but that doesn't make it so. In any case I'm not talking the entirety of the whole plan, but this one large part or aspect of it, that of giving priority to the junior creditors. At least that part obviously has little or nothing to do with the legally stated goal. A dead Chrysler might be worth two cents or so on the dollar (for repaying it's obligations...), whereas a restructured business, shorn of two thirds of it's debt over-hang and operating with a more competitive cost structure, might create value for generations.... (ultimately making debt swapped for equity worth something). Giving higher priority to senior creditors does not require liquidation and "a restructured Chrysler" does not require or even benefit from, requiring senior creditors to take a bigger hit than junior creditors. In fact the shift of the normal pattern is likely to hurt Chrysler in the long run by discouraging lending to it. It should still (eventually) be able to borrow (assuming it does recover), but on the average its likely that it will only borrow at rate that is at least slightly higher than it otherwise would have had to pay. It may generally discourage lending to companies with politically connected or powerful unions rather than just to Chrysler.