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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: quehubo who wrote (111797)	5/24/2009 9:43:08 AM
From: Dale Baker	Respond to of 541854

How much will you lend as a senior secured creditor if the government can step in and pay off unsecured debt while leaving you much less? For the vast majority of companies with zero realistic prospect of BK, it won't matter at all. This could impact the fringes of junk bond issuance, but those borrowers are already paying huge spreads to borrow anything anyway. In fact, it might be better if the marginal operations don't get capital and just go away, leaving the capital for healthy firms who don't run the Chrysler risk. I haven't seen any players from the actual corporate bond market talking about these worries, just political bloggers.

To: quehubo who wrote (111797)	5/24/2009 9:55:08 AM
From: KyrosL	Read Replies (1) \| Respond to of 541854

The Chrysler senior debt holders get exactly what the Chrysler liquidation value is. Isn't this what you want? In fact, because the process avoids the expenses of bankruptcy litigation that will result from a protracted conventional bankruptcy, the senior debt holders actually get more, because they avoid paying hefty litigation fees from liquidation value. Now, the Government also decided to put its money into Chrysler to avoid liquidation -- something that the market did not want to do. The Government decided that its Chrysler money will be largely used to benefit the workers. You can argue against the Government's decision to channel its money to the Chrysler workers and prolong Chrysler's life, but you cannot at the same time argue that the senior debt holders are cheated.