Posted by Larry Doyle on May 7th, 2009 11:09 AM |
Bill Gross of Pimco recently wrote:
If the government indeed becomes your investment partner, you should keep the big Uncle in clear sight and without back turned.
Will the manner in which Chrysler has been handled up to now and is handled going forward serve as legal precedent for future bankruptcies? We will learn a lot VERY quickly as General Motors is in very much the same predicament. Given the issues raised by Tom Lauria, attorney for some of the non-TARP Chrysler creditors, are our markets witnessing populism taking precedence over the rule of law? Will our courts try to “thread the needle” under the guise of these automotive companies being special situations?
Answers to these questions will likely develop over time. Different justices may read the law in a different manner. I caution investors, though, that costs associated with parsing the rule of law may be postponed but are not foregone.
To that end, I believe it is also wise to take heed from Jeff Matthews of Ram Partners who raises these questions in a recent short interview on TechTicker:
Additionally, for those who have not listened to the ten minute interview Tom Lauria provided Frank Beckmann on WJR Radio, I will provide my recap and link here: Is Barack Obama Going Tony Soprano? This interview is a MUST LISTEN!!
Posted by Larry Doyle on May 4th, 2009 1:25 PM |
The Chrysler bankruptcy drama escalates. Bloomberg reports, Chrysler Non-TARP Lenders Object To Auction Plan.
Uncle Sam would seemingly like to fast track the delivery of Chrysler into Fiat’s hands and run roughshod over the standard rules and regulations of bankruptcy proceedings. Will Judge Henry Gonzalez allow this to happen?
The lenders maintain:
. . . the U.S. government is violating federal law in order to preserve the automaker.
The group, calling itself Chrysler’s non-TARP lenders, in reference to the Troubled Assets Relief Program, seeks to block the proposed sale to an alliance led by Fiat SpA, as well as a request by the U.S. automaker for approval of a $4.5 billion Treasury loan to finance the reorganization. The group said secured lenders who agreed to the Fiat deal, such as JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc., were conflicted because they had also accepted TARP funds.
The process is “tainted” because it was dominated by the government, the lenders argued in papers filed today in U.S. Bankruptcy Court in Manhattan. The group also said the short period of time given to evaluate the sale was improper and the hearing on bid procedures that began today should be delayed. The judge delayed the hearing until 2:30 p.m. tomorrow, ordering the members of the lender group to reveal their identities. (more…)