The bankruptcy laws offer redress for bond holders. Rating of bonds is one thing, value is determined in the final analysis in BK court. Bond holders were considered first in line to recoup. At least it used to be that way.

Bonds are essentially loans. Risk? Yes. Different kind of risk from stocks. That tends to make them attractive to large investors or investment houses.

This link may help:

http://www.sec.gov/investor/pubs/bankrupt.htm

 

I hope that this little tidbit doesn't escape the masses. That the public realizes this is crucial to Chrysler's survival post-bankruptcy.



:Jake puts on Moderator hat:

Everyone, let's please stay away from the political side of the issue.

 

Don't forget...Ceberus owns 51% of GMAC

 

The thing is..it was not a speculative investment. Chrysler had plenty of assets to back the loans in the case of a bankruptcy.

 

I hardly ever can find a reason to disagree with you on things... and agree with a lot of what you've posted herein. But as for shareholders... I don't see why they should receive anything more than zero. Buyers of stock know what they're getting into. They could have sold their stock last week and got its full current worth. If they wanted more than zero, they should have sold.

I hope it's run well too... and believe it's a reasonably good investment of our tax dollars so far. I also believe that taxpayers would have had to pay a lot more if Chrysler had just been allowed to be liquidated... and the US Govt (+taxpayers) would without a doubt be paying the pensions then too.

The whole arrangement is risky. The coming smackdown of dissenting bondholders will no doubt reek of class warfare. The US gov't and the UAW will have a lot more say in company direction than a lot are comfy with. It's going to put the last truly independent US carmaker (Ford) in the weird position of doing labor negotiations with competitors. But it's likely saved a lot of jobs and a carmaker with a rich and compelling American heritage. Overall it's about the best outcome one can get in the current circumstances.

 

Keep in mind the shareholders consist of Cerberus & Daimler.

They get nothing because they took a $38 billion company and made it worthless. (Moreso Daimler than Cerberus.)

 

We don't disagree that if a company goes under the stockholder should lose. I'm good with that.

What I am suggesting is that Chrysler was not "under" until the bankruptcy. I don't mean to put too fine a point on it. From the descriptions of the government worked out deal, nothing is said about what Cerberus <their investors> gets. Were I to guess it is likely a new Chrysler will be formed and and old Chrysler will be left with the bad debt.

It just little tidbits I think we as taxpayers should know. It's OUR money financing the deal.

Once again, stockholders losing everything is a part of how the games works, but that's settled by chapter 11 or chapter 7. Neither of which were going to happen in the Chrysler instance until it was forced by the bondholders.

 

I think the point is that Chrysler is NOT going under. If a company "goes under", then everyone loses. That's simple and perfectly understandable. But Chrysler will survive and yet the modest owners-at-large (average Joe stockholders) suddenly lose everything in their investment? Doesn't seem quite right. And these same people are helping to fund this to boot, via taxes.

 

The absurd part is that many want to turn this into a politically charged, class warfare issue, since that makes great sound bites.

You certainly wouldn't want to say that these stocks and bonds are actually from Mom and Pop American, funding their IRA, 401K, or their kid's college fund. Nope, it's alot more politically expediant to just say, "if you show dissent to the plan, I label you a greedy, faceless, unpatriotic, speculator."

 

You guys are way more educated than I am on this and matters like these, but in laymans terms, what does this mean for the suppliers? do we have any idea how many jobs will in effect be lost? Im sure that yes, the company is being staged to not "go the way of the dodo" but at the same time, im sure that jobs will be lost, at the manufacturer level, as well as at the supplier level? what can we expect to see in attrition? speculation of course from us as i dont think we're the ones making the decisions, but what does this mean? and also what does it mean for GM? does it mean that GM's path to Bankruptcy is a given now?

 

"WASHINGTON – The U.S. government will likely lose much of the $4-billion loan it gave Chrysler LLC at the end of last year as part of its bankruptcy case, officials said today.



The Bush administration was unable to secure its loans to any assets, and will recover only as much as any other unsecured debtors. It also may lose part of the $1.5 billion lent to Chrysler Financial backed by auto loans.


The Obama administration also said new Chrysler will be funded through a total of $10.5 billion in loans, with $8.08 billion from the United States and $2.42 billion from the Canadian government.


"We appreciate the close and cooperative relationship between the U.S. and Canadian governments during this period of restructuring in the auto industry,” President Barack Obama said in a statement. “Together, we have put in place a financing package that will give Chrysler a chance to achieve financial viability.”


The Obama administration says fixing Chrysler’s debts is the main objective of the bankruptcy filed today. It will use money from the $700-billion financial industry bailout to fund up to $3.3 billion in bankruptcy court financing and $4.7 billion in loans for Chrysler to exit and launch its partnership with Fiat.


The $2 billion that’s been offered to secured creditors in return for canceling $6.9 billion in debt will come from a mix of U.S. and Canadian money, officials said."

 

I wish I could answer your question.

I do recall that some leglislation to assist suppliers was approved some time back, but if it was only Tier 1 level suppliers is not something I'm aware of. There are many levels of suppliers in the chain, I doubt the leglislation covered them all.

American axle cut lots of jobs just days ago, and they are moving production to Mexico from what I understand.

 

Exactly. Thanks for the succinct statement of the point.

 

Thats ok. I realize much of what I asked is still up in the air but as a family that bleeds GM blood, Im very very concerned. I'm already saddened that the G8 is going to go

I dont see how having our suppliers cut jobs in the states only to move them to mexico is helping the economy or anything else. Overall i think we're on an economic downward spiral. It may just be a matter of time in my opinion before the dollar is worthless.

Im just really worried about all those good americans that have jobs in the supplier industry that will possibly be in jeopardy of loosing their only form of income. I myself dont work in the industry but I know that it will effect everyone.

 

I appreciate your sentiments. I don't work for a supplier either, but like you, I worry for them because they are Americans and trying to do the best for themselves and their families.

I hope against hope that the economy NOT will tank. There's only so much paper money one can and should print.

I can tell you that I have had different careers in my lifetime. It can be troubling to take another path. I have done it in the past. I know the anxieties all too well.

The only guarantee is that that are no guarantees.

Looking at things with as much logic, wisdom, and honesty does help. Logic and wisdom are acquired and must be tuned regularly. Honesty is a have it or don't have it thing.