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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (482629)	5/21/2009 8:37:21 PM
From: TimF	1 Recommendation Read Replies (2) \| Respond to of 1573900

The gov't didn't do it.....the BK judge did. No, the court decision hasn't come down yet. And even when it does it likely will be based on the agreement between the creditors. Technically there is such an agreement, but it wasn't a meeting of minds, it was forced through by the government. The funds turned down the gov't's offer. They made a big brouhaha about it and that forced Chrysler into BK. And once the bankruptcy proceedings started the government rammed through a big hit to the funds over their objection. It hasn't been finalized yet (as I mentioned above the final court decision, or judicial affirmation of the agreement, hasn't happened yet), but its very likely that any changes will be fairly small. The judge is a strong judge with an impeccable reputation. He would scream bloody murder if the gov't pressured him to something. The government isn't pressuring him (at least I don't think it is). Its pressuring other creditors. Again, this is not a precedent setting event......so your concerns are unwarranted. Not precedent setting doesn't imply no serious cause for concern. Beyond that it is new that the federal government takes such an aggressive and activist stance, doing so much to push everything to favor junior creditors over senior creditors. Given what I know about car companies and their ongoing profitability, investing in Chrysler was an incredibly stupid move by the Indiana Teachers' Retirement Fund. Probably. (Definitely if they didn't make it a small highly speculative position with a high nominal rate of return, either from directly lending at extremely high rates and with contractual assurance of seniority or by buying debt from other lenders at a very deep discount.) But making senior creditors in to junior creditors by government fiat, makes all lending to companies with politically connected stakeholders/junior creditors risky and even stupid, at least as long as Obama is in office. If I was a major lender or investor, I'd avoid lending to unionized companies after this move by the government, unless I thought that I'd get a much higher return to cover the political risk.