Originally Posted By: PT1
The Fiat deal has been approved at all levels except the Hedge funds who wanted a larger percentage than all other participants. This chap 11 will allow the deal to be completed and rid them of the hedge fund guys stoopid demands. Then Chrysler will come back with the same deal as before...minus some bondholders & Wall St. fund managers. The US Govt will give them $4billion to make it through the Chap 11 proceedings and $4 bil once they emerge. This will be very interesting of the bondholders & hedge fund guys don't sue. But I doubt they can if Chrysler is in Chap11. Then the bondholders will get what the Judge gives them and have no recourse to hold anyone hostage.
Chrysler better not ever try to go back to the bond market to get more capital, because no one in his right mind will ever loan them a cent again.
Bankruptcy laws, for the last couple centuries, have established a hierarchy of which creditors get paid first. Obama turned this hierarchy upside down.
Chrysler is not the only company that will be hurt. All interest rates on corporate bonds will climb higher than they would otherwise be. The financial advisors who help people planning for retirement and those already retired will strongly recommend that they stay away from corporate bonds. Pension funds and high-grade mutual funds will stay away.
Imagine, if you will, the best-managed and most stable company in the world. Let's just pick Proctor & Gamble, for instance... been around for a century, always makes a profit, always pays its debts. Even companies like P&G will have to pay much higher rates if they go to the bond markets for capital, thanks to Barack Obama.
One other impact -- even more companies will cancel any expansion plans they might have in the US, and will instead direct these investments to their overseas subsidiaries. They will be able to borrow at lower cost, and they will not have to pay the higher taxes and meet the stiffer regulatory burdens being imposed by Obama. So the Chrysler bankruptcy scheme will encourage job creation in other countries at the expense of jobs in the US.