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Fund Managers Burned by Obama Now Say They Are Wary (Update3)
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By Caroline Salas
May 20 (Bloomberg) -- Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLCs bankruptcy.
Obama put Chrysler under court protection on April 30 after lenders balked at a proposal giving them about 29 cents on the dollar for their $6.9 billion in debt. The investors said the presidents plan favored a union retiree medical fund whose claims ranked behind them for repayment. It was offered a 55 percent equity stake in the automaker.
Pacific Investment Management Co., Barclays Capital and Fridson Investment Advisors have joined Schultze Asset Management LLC in saying lenders may be unwilling to back unionized companies with underfunded pension and medical obligations, such as airlines and auto-industry suppliers, because Chryslers creditors failed to block Obamas move. The reluctance may put additional pressure on borrowers seeking capital in the worst financial crisis since the Great Depression...
Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC’s bankruptcy.
I sure as hell wouldn't lend you a dollar if all you wanted to give me back was 29 cents.. that was just plain robbery on the thugs and the unions part.
I sure as hell wouldn't lend you a dollar if all you wanted to give me back was 29 cents.. that was just plain robbery on the thugs and the unions part.
If the unions hadn't given up their pensions and taken stock in leiu of them, those lenders would have gotten ZERO on the dollar.
Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC’s bankruptcy.
Well, he doesn't really have to worry about that too much.
Fewer and fewer industries have unions, anyway.
Ame®icano;1226866 said:I sure as hell wouldn't lend you a dollar if all you wanted to give me back was 29 cents.. that was just plain robbery on the thugs and the unions part.
If the unions hadn't given up their pensions and taken stock in leiu of them, those lenders would have gotten ZERO on the dollar.
Their investments were secured, they would get much more if it went to court. They were pressured not to go to court.
Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLCs bankruptcy.
Well, he doesn't really have to worry about that too much.
Fewer and fewer industries have unions, anyway.
I think the impact will be much greater than just companies with powerful unions. Foreign investors, and even American investors will have begun to see danger in investing in American corporations whether bonds or stocks, even some big oil corps.
Fanny and Freddy, thought to be immune from failure or huge percentage losses, now have stock values little more than a hundredth of their earlier highs two years back.
Taken seperately these things might be let pass, but taken together they have huge implications for investors and increasingly will not be ignored. Money will fly to more secure economies.
I sure as hell wouldn't lend you a dollar if all you wanted to give me back was 29 cents.. that was just plain robbery on the thugs and the unions part.
If the unions hadn't given up their pensions and taken stock in leiu of them, those lenders would have gotten ZERO on the dollar.
Of course I wouldn't expect you to understand that, Willow.
You're so blinded by your partisanship you can't think straight.
Ame®icano;1226866 said:If the unions hadn't given up their pensions and taken stock in leiu of them, those lenders would have gotten ZERO on the dollar.
Their investments were secured, they would get much more if it went to court. They were pressured not to go to court.
Secured by what, exactly?
Had they been secure they wouldn't have had to go to court.
Debtors have to stand in line when a company goes down, and the courts decide what percentage of the corpse each debtors gets
They're damned lucky to have gotten 29% back, I suspect.
'Chrysler was broke
Secured by what, exactly?
.....
Debtors have to stand in line when a company goes down, and the courts decide what percentage of the corpse each debtors gets
They're damned lucky to have gotten 29% back, I suspect.
'Chrysler was broke
Had they been secure they wouldn't have had to go to court.
Ame®icano;1227069 said:Secured by what, exactly?
.....
Debtors have to stand in line when a company goes down, and the courts decide what percentage of the corpse each debtors gets
They're damned lucky to have gotten 29% back, I suspect.
'Chrysler was broke
By what? By assets.
The assets of the company are liquidated and THEN the creditors line up to get their share of the procedes.
You claimed that the debts was a secured debt which therefore got ahead of other debtors.
I asked you what kind of secured debts and based on how you're winging it, I suspect you were talking through your hat.
There are secured and unsecured investments. Secured are company bonds and preffered stocks, unsecured are common stocks.
Bonds are not noramlly secured in a bankruptsy situation, sport. They are simply debts. They may be ahead of some other kinds of debts, but that does not make them secure.
Unsecured are bringing more profits in regular times, and in bankruptcy are last in line. In bankruptcy, secured investments are first in line when company assets are sold.
Okay, what is the NATURE of those secured bonds, then? Please do tell us specifically what makes those bonds (which are merely debts) more secure than the other debts.
When Daimler bought Chrysler they paid $36B. Today Chrysler assets are worth estimated $6.9B, that includes brand names, factories and materials. There is also $20 billion Chrysler's long-term liability to pay health care for retirees.
Yeah, okay...so when the business was liquidated, how much on the dollar should they have gotten exactly?
You don't know, do you?
Had they been secure they wouldn't have had to go to court.
Non-TARP investors wanted to go to court, but WH forced them to take a deal 29 cents on a dollar.
Yeah, okay...so when the business was liquidated, how much on the dollar should they have gotten exactly?
You don't know, do you?
Ame®icano;1227279 said:I explained to you already. Secured debt has priority over unsecured when assets are sold. They are first in line to get paid.
Put it this way. You borrow money to mortgage your house. Then you get second mortgage to fix it. Then you lose your job and cant pay back borrowed money. You forclose and bank takes your house and sell it. First mortgage is secured investment, therefore your first mortgage gets paid first, and if anything left, goes to second mortgage. If house is worth less then just first mortgage, second mortgage gets nothing, and first take some loses.
Yeah, okay...so when the business was liquidated, how much on the dollar should they have gotten exactly?
You don't know, do you?
Thats up to bankruptcy court to decide and NO ONE else.
Union Power
02 May 2009 10:49 am
I see a lot of liberal blogs crowing that Obama's really taking it to the hedge funds who are holding out on the Chrysler bankruptcy. Hedge fund managers, you see, have a civic duty to lose large amounts of other peoples' money in order to ensure that the UAW makes as few sacrifices as possible in a bankruptcy.
Here's the thing: hedge fund managers don't care what the public thinks. The public isn't allowed to invest in them. And the holdouts are, basically definitionally, not direct beneficiaries of federal largesse.
No, hedge funds care what rich people think. And if you were a rich people, how would you react to the news that a hedge fund manager who had a senior lien had refused to allow his claim to be treated like unsecured debt in a bankruptcy? Would you be outraged and pull your money? Remember that as a rich people, you could have donated large sums to the UAW, or the US government, if you wanted to.
This might well be good publicity for the holdouts. I'd certainly rather put my money in with Oppenheimer than with someone manager who is going to toss his fiduciary duty to the winds and make large tax-free gifts to the United Auto Workers. But then, I'm not very patriotic.
Which brings us to the real question, which is, when did it become the government's job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? Leave aside the moral point that these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.
No, leave that aside for the nonce, and let's pretend that the most important thing in the world, far more interesting than stupid concepts like the rule of law, is saving unions. What do you think this is going to do to the supply of credit for industries with powerful unions? My liberal readers who ardently desire a return to the days of potent private unions should ask themselves what might happen to the labor movement in this country if any shop that unionizes suddenly has to pay through the nose for credit. Ask yourself, indeed, what this might do to Chrysler, since this is unlikely to be the last time in the life of the firm that they need credit. Though it may well be the last time they get it, on anything other than usurious terms.
This was a terrible decision by Obama. It is absolutely true that investment funds are pulling back from participating in programs designed to get credit moving.
About Those 'Speculators' . . .
Pension funds also got whacked by Uncle Sam.
Remember how President Obama blamed Chrysler's bankruptcy filing last month on "a small group of speculators" who turned down Treasury's $2 billion final offer for their $6.9 billion in debt? Well, it turns out that hedge funds and other short sellers weren't the only secured creditors who got a raw deal from Uncle Sam.
Indiana Treasurer Richard Mourdock revealed this week that his state's police and teacher pension funds have lost millions of dollars in the Chrysler "restructuring." Indiana's State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher's Retirement Fund "suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government," reports Mr. Mourdock.
Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy "secured" status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy.
"In the past, to be 'secured' meant an investor was 'first in line' in the event of a bankruptcy and 'non-secured' creditors would receive value after secured-creditors were paid," Mr. Mourdock says. "In the Chrysler bankruptcy, however, secured creditors received $.29 on the dollar even as non-secured creditors received higher values and ended up with a 55% ownership of the new company, which is fundamentally wrong and a dangerous precedent to the capital markets."...
Ame®icano;1226866 said:Their investments were secured, they would get much more if it went to court. They were pressured not to go to court.
Secured by what, exactly?
Had they been secure they wouldn't have had to go to court.
Debtors have to stand in line when a company goes down, and the courts decide what percentage of the corpse each debtors gets
They're damned lucky to have gotten 29% back, I suspect.
'Chrysler was broke
The fair thing to have done was to give Chrysler to her debtors.. by rights they owned her.
