Word: debtors
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...sure, there's no denying the facts. The U.S. is the world's largest debtor nation and only digging itself in deeper. Respect for corporate America is evaporating. Profligacy produced sham economic growth. A disconnect between Washington's global ambitions and its available resources - what British historian Paul Kennedy calls "imperial overstretch" - has undermined national strength...
...laid out Obama's unappealing options. Chrysler could be scrapped for parts through an unstructured bankruptcy. Or the task force could try to make the Fiat proposal work, using the leverage of bankruptcy to force concessions and the Treasury's wallet to refinance the debt and recapitalize operations as debtor in possession. Some task-force members argued that, painful as it would be, liquidating Chrysler would strengthen the survivors - GM and Ford...
...Last week the Treasury Department provided Chrysler $4.1 billion in debtor-in-possession financing to help it get through bankruptcy, bringing the total amount of federal 'loans' to Chrysler to more than $8.2 billion. GM, meanwhile, has received $15.4 billion from the Troubled Asset Relief Program and its total loan request could top $27 billion before the company completes its restructuring, a GM spokesman says. Even that figure assumes that GM's cash burn, which was running more than $3 billion per month in the first quarter, begins to slow later in the year. If the recession deepens, GM could...
...Bondholders who would not settle with the government and Chrysler are appropriately greedy. The money that they put into Chrysler debt came from pension funds and individual investors in many cases. It is not as if Citigroup (C) is the debtor left holding the check. Citigroup could, at least, petition the Fed to get back any money it lost on its Chrysler investment...
...might argue that given GM's troubled state, the market value of the bonds is not $27 billion but more like $3 billion. But if you accept that troubled-debtor logic, then it's only fair to apply the same logic to the money owed by Chrysler to the UAW's VEBA - so its chips should be marked down as well. (In fact, by law the VEBA's IOU is junior to the bondholders' IOU.) Thus, the VEBA's IOU should not translate into a 39% equity stake but a small sliver of that. (Read about Detroit's attempts...