Court blocks Chrysler sale

billy3esq wrote:

alfadriver wrote: Many scream that they are not secured debt holders, but I'm not so sure of that- a contract was signed to put money into a trust to fund X- that seems like a pretty secure contract that must be paid just like any bond.

That's not what secured debt means. Secured debt is a term of art that means that there are assets that are transferred to the lender in the event of default by the borrower. In the consumer context, mortgages and car loans are examples of secured debt. Credit cards and signature loans are unsecured.

So who should win- someone that wrote a contract stating that you will pay X to trust fund or the guy who buys a bond? We are all assuming that the bond guy wins, but I don't have a copy of the contract where the trust fund payments were laid out.

Right now, the courts have decided on the signed contract between two parties stating that party 1 will pay into party 2's trust fund $X vs. the investor who chose to buy bonds of party 1. Take out the UAW, and look at it from which contract is more powerful- the bond or the trust fund?

And if they are equal, being that they are not the same kind of debt, they can (and were) be independently negotiated for a settlement. The UAW took the deal, the bond holders have not.

BTW, I wish I could find cross references- but the more I read, the more this bond agreement is about the interest, not the actual value. On one article, they are being offered ~$.30 on the dollar, on another, it's $35M out of $42. Put the two together and you can see they are arguing about the final bond value- not the purchase value. If that's the case, then this seems like a part that IS decided on in basic bankruptcy court- how much return you get.

Anyway, I still think that there will be howling even if the SCOTUS decides not to hear it, thus confirming that this is constitutional by the current court.

I'm REALLY hoping that it will at least get opinions from both sides of the court, not just the brush off. I'm interested in the ruling for the sake of iterest.

Eric

In reply to Xceler8x:

Here are some interesting comments from someone who was actually involved...http://keithhennessey.com/2009/06/07/dr-goolsbee-gets-it-wrong-on-the-auto-loans/

PeteWW wrote: In reply to Xceler8x: Here are some interesting comments from someone who was actually involved...http://keithhennessey.com/2009/06/07/dr-goolsbee-gets-it-wrong-on-the-auto-loans/

Thanks for the update Pete. I hadn't seen that. It's good to get both sides of the story.

alfadriver wrote:

billy3esq wrote:

alfadriver wrote: Many scream that they are not secured debt holders, but I'm not so sure of that- a contract was signed to put money into a trust to fund X- that seems like a pretty secure contract that must be paid just like any bond.

That's not what secured debt means. Secured debt is a term of art that means that there are assets that are transferred to the lender in the event of default by the borrower. In the consumer context, mortgages and car loans are examples of secured debt. Credit cards and signature loans are unsecured.

So who should win- someone that wrote a contract stating that you will pay X to trust fund or the guy who buys a bond? We are all assuming that the bond guy wins, but I don't have a copy of the contract where the trust fund payments were laid out.

Bankruptcy law has a well-established order of who gets paid first when stuff goes pear-shaped. Think about it: by definition, you aren't in bankruptcy if you can afford to pay everybody.

The details of the order aren't important for our discussion (although very important to the parties), but the gist of it is: (1) secured creditors, (2) unsecured creditors, (3) shareholders, if anything remains.

Everything I've read says the Indiana pension fund is secured [edit: (to answer Jensenman's question)] and the UAW is not. If this is true, the answer to your question as to who should win is: the Indiana pension fund. They're not winning (or at least don't think they are), hence the appeal.

To analogize in the consumer context: Chrysler is broke, the government is selling their house to pay off the MasterCard bill, and the mortgagee is pissed off because he's not getting paid first out of the proceeds of the sale of the house. The fact that Chrysler and MasterCard agreed to stick it to the mortgagee doesn't make it right.

The only semi-plausible explanation I've heard for why the bondholders are getting the shaft and the UAW isn't is that this isn't a normal bankruptcy where the goal is to break up the company and help the stakeholders salvage what they can from it. The idea is that Chrysler (and GM) will keep on operating, and if it's to do so, it will need it's skilled workforce. Like it or not, these companies do need the UAW workers to be able to keep operating, or they are done right now. You can dismiss the UAW as a bunch of line-jockeys who are easily replaced, but that's not the whole story, especially when you are talking about skilled trades like machinists and such.

That was an interesting behind-the-scenes from Keith Hennessey. It looks like Bush was really trying to work with The O, but The O and his "people" were just too good to try to work with the Bush team. And still, they proclaim "Bush" as the cause of everything from the Cavalier to Global Warming.

Anyway, Billy, if Chrysler and Mastercard have the ability to stick it to Countrywide, and all Countrywide can do is biatch about it, guess what's gonna happen?

Xceler8x wrote: REPORT: Cheney says Bush left GM bankruptcy for the next guy

HawHaw

ignorant wrote:

Xceler8x wrote: REPORT: Cheney says Bush left GM bankruptcy for the next guy

HawHaw

Interesting how two articles can say basically the same thing so differently.

"You some-bitch, I can be president right now all I gotta do is pull out this piece and cap your ass!"

John Brown wrote: "You some-bitch, I can be president right now all I gotta do is pull out this piece and cap your ass!"

"...or take you hunting."

This just in: The Supremes are not going to block the sale.

http://www.chron.com/disp/story.mpl/front/6467598.html

Oh well, maybe I'll be able to score an Abarth 500.

Quoted from above article...

The court issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find that the issue raised is serious enough to warrant hearing a full appeal and that a majority of the court will conclude the lower court decision was wrong.

“The applicants have not carried that burden,” the court said.

The court did not consider the merits of the opponents’ arguments, only whether to hear their full-blown appeal

?????

How do they decide they don't meet the burden with out considering the merit of their argument?

So, apparently, scores of bankruptcy laws were not thrown out the window, then. Gone from the bankruptcy court all the way to the SCOTUS- who has never sided blindly with any administration- and the court has held up the deal....

I just wish there was an opinion, since I'm still not convinced the security of the debt- one one chart I've seen, the bond holders and the UAW trust were of at least equal security, behind banks.

But I'm sure that even with the SCOTUS decision, most will still claim foul.... I'm still not sure one side or the other, since few have actually pointed out the actual strenght of the Trust contract.

Is this all going to be a moot point once the deal is done and the US realized that FIAT sucks WORSE than Chrysler?

http://www.motorcities.com/vehicle/09F8A324129295.html\

2009 Chrysler and Fiat Ranked Worst in UK J.D. Power Study J.D. Power and Associates and What Car? Report: Lexus 4x4 is Britain’s Most Satisfying Car Hybrid Toyota Prius Ranks Second Lexus Most Satisfying Brand for a Ninth Consecutive Year 5 June 2009 – The Lexus RX and Toyota’s hybrid car, the Prius, are the first- and second-ranking models in the J.D. Power and Associates/What Car? 2009 UK Vehicle Ownership Satisfaction Study (VOSS)SM released today. The Lexus RX earns a score of 853 on a 1,000-point scale, with owners reporting particularly high satisfaction with the model’s quality/reliability and appeal as well as servicing at the dealership. 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Also receiving segment-level awards are the Honda Jazz (small car), Škoda Octavia (lower medium car), Audi A6 (executive/luxury car), Mercedes-Benz CLK-Class (sports car), Citroën Grand C4 Picasso (MPV) and Lexus RX (SUV). “Lexus consistently delivers an exceptional ownership experience for customers in the UK,” said Susan Barnes, European automotive director at J.D. Power and Associates. “In these challenging times, satisfaction programmes could be well worth the investment. Incentive schemes for the automotive sector, such as the recently introduced scrappage programme, might boost vehicle sales in the short term, but a vehicle purchase which is made as a result of an exceptional experience should be the longer-term goal, especially when the incentive schemes come to an end.” The study finds that satisfaction levels and brand loyalty are strongly linked, with more than 59 percent of highly satisfied customers reporting they “definitely will” consider buying the same vehicle make in the future. Conversely, only 18 percent of customers who report having a less satisfying experience intend to do the same. “In a declining automotive market, keeping existing customers and gaining new ones becomes ever-more challenging,” said Barnes. “Providing an outstanding experience can make all the difference in keeping customers with the brand and helping towards a brand’s future economic success.” The redesigned 2009 UK Vehicle Ownership Satisfaction Study (VOSS) is the successor study to the UK Customer Satisfaction Index (CSI) and is based on the evaluations of more than 15,700 online interviews from UK car owners after an average of two years of ownership. The study includes 29 brands and 101 models. Owners provide detailed evaluations of their vehicles and dealers, which cover 67 attributes grouped in four measurements of satisfaction. In order of importance, they are: vehicle appeal (37%), which includes performance, design, comfort and features; vehicle quality and reliability (24%); ownership costs (22%), which includes fuel consumption, insurance and costs of service/repair; and dealer service satisfaction (17%). J.D. Power and Associates conducts studies around the world, including Europe (France, Germany, United Kingdom); North America (Canada, Mexico, United States); Asia Pacific (China, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Taiwan, Thailand); and Africa (South Africa). The annual J.D. Power and Associates/What Car? study gives consumers access to reliable and accurate information about many vehicle models, and helps manufacturers provide high levels of satisfaction to their customers. More comprehensive study results are published exclusively in the July issue of What Car? on sale Thursday, June 11, 2009.1 About J.D. Power and Associates Headquartered in Westlake Village, California, U.S.A., J.D. Power and Associates is a global marketing information services company operating in key business sectors including market research, forecasting, performance improvement, Web intelligence and customer satisfaction. The company’s quality and satisfaction measurements are based on responses from millions of consumers annually. For more information on car reviews and ratings, car insurance, health insurance, cell phone ratings, and more, please visit JDPower.com. J.D. Power and Associates is a business unit of The McGraw-Hill Companies. About The McGraw-Hill Companies Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor’s, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2008 were $6.4 billion. Additional information is available at http://http://www.mcgraw-hill.com/. About What Car? What Car? has been Britain’s best guide to buying a car for more than 30 years. Its blend of authoritative road tests, ground-breaking investigations, consumer surveys, money-saving advice and comprehensive data are referred to by more new and used car buyers than any other magazine. Over a quarter of UK car buyers consult What Car? before making a decision. 1 Study results published in What Car? use some segment names and definitions that differ from J.D. Power and Associates’ segmentation. These include: supermini (for small car segment), small family car (for lower medium car segment); family car (for upper medium car segment) and compact executive (for selected premium models in the upper medium car segment).

..and what do you do with a witch?!

For some reason this whole deal reminds me of that scene in The Holy Grail.

Apparently they didn't block it very well: http://money.cnn.com/2009/06/10/news/companies/chrysler_fiat/index.htm

John Brown wrote: Is this all going to be a moot point once the deal is done and the US realized that FIAT sucks WORSE than Chrysler?

A marriage of equals.

wouldn't you just add their scores together now? it looks pretty good in that case.

Toyman01 wrote: How do they decide they don't meet the burden with out considering the merit of their argument?

it's a weird distinction between deciding whether the party has the better argument vs. whether the argument sounds like it's good enough 9and the issue at stake is serious enough) to be worth considering.

the court basically said, "you could be right, but you haven't shown us that your arguments are good enough or the problem is big enough to make it worthwhile to hear the appeal."

billy3esq wrote: Oh well, maybe I'll be able to score an Abarth 500.

see? every cloud has a silver lining.

alfadriver wrote: So, apparently, scores of bankruptcy laws were not thrown out the window, then.

No, it just means the Supremes couldn't be bothered to hear it now. Refusing to review the case is not the same thing as affirming the lower court, although it has that practical effect in this case.

Besides, the Supreme Court isn't final because they're infallible, they're infallible because they're final.

Toyman01 wrote:

ignorant wrote:

Xceler8x wrote: REPORT: Cheney says Bush left GM bankruptcy for the next guy

HawHaw

Interesting how two articles can say basically the same thing so differently.

Cheney is trying to sell books. That's why it's funny.

Buzz Killington wrote: wouldn't you just add their scores together now? it looks pretty good in that case.

Nah, you'd have to divide by '2'

alfadriver wrote: So, apparently, scores of bankruptcy laws were not thrown out the window, then.

Oh yes they were. And a whole bunch of other laws as well. That's what the suit was about. The SC decided to basically ignore written established bankruptcy and commercial laws and let the sale/merger/gift go forward.

Remember the old saw about howing the bank a dollar and the bank owns you; owe the bank a million dollars and you own the bank?

The thing is, I see most of your reactions as- "It didn't go 'my' way so, it must be still wrong, even though numerous courts reviewed it." Had it gone the other way, you would be happy, right? So your satisfaction was already predicated on how the SCOTUS decided.

Whereas, I honestly don't know how much of the actual deal was done outside of the court, which makes it's part appeal not reviewable.

RE- the pensioners- I've also read articles that pointed out that many of the bond holders bought the bonds at distressed rates, expecting to get full return on them. And most people seem to think that they deserve full refund for their 42% discount admisssions- that's what they think the courts should do. And other "expert" articles explain that that in the past, the courts have consistently awarded compensation based on actual purchase price, and not face value, in bankruptcy court. In essese, the $.32/dollar was actually $.32/.42, well above what all the unsecured debt holders got. On top of that, other "experts" I've read clearly explain that the dollar swap has much higher potential to make more money than before than the straight up buy out.

So you can continue to assume that you are right, based on your ideas, and whereever you get your facts, or you can have more of an open mind to think that you may be wrong, and the courts got more of it right that you think. There are "experts" writing opinions to both sides. Unless you are a bankruptcy lawyer, I seriously doubt you know any more than what you are being told.

(and this isn't an editorial on the govenment investing in companies, BTW, just THIS set of bond holders vs. the rest of the debt holders)

Eric

alfadriver wrote: The thing is, I see most of your reactions as- "It didn't go 'my' way so, it must be still wrong, even though numerous courts reviewed it." Had it gone the other way, you would be happy, right? So your satisfaction was already predicated on how the SCOTUS decided. Whereas, I honestly don't know how much of the actual deal was done outside of the court, which makes it's part appeal not reviewable. RE- the pensioners- I've also read articles that pointed out that many of the bond holders bought the bonds at distressed rates, expecting to get full return on them. And most people seem to think that they deserve full refund for their 42% discount admisssions- that's what they think the courts should do. And other "expert" articles explain that that in the past, the courts have consistently awarded compensation based on actual purchase price, and not face value, in bankruptcy court. In essese, the $.32/dollar was actually $.32/.42, well above what all the unsecured debt holders got. On top of that, other "experts" I've read clearly explain that the dollar swap has much higher potential to make more money than before than the straight up buy out. So you can continue to assume that you are right, based on your ideas, and whereever you get your facts, or you can have more of an open mind to think that you may be wrong, and the courts got more of it right that you think. There are "experts" writing opinions to both sides. Unless you are a bankruptcy lawyer, I seriously doubt you know any more than what you are being told. (and this isn't an editorial on the govenment investing in companies, BTW, just THIS set of bond holders vs. the rest of the debt holders) Eric

touche...someone give this man a cigar.

Open mindedness...its whats for dinner bum bum bum

got objectivity?

on a serious note, eric has a very good point. I think we all went into this thing knowing what we wanted, and simply were looking for the courts to reaffirm those predetermined opinions. I am glad there are people like eric who will bitch slap me with reality from time to time...just please take your rings off first next time

alfadriver wrote: The thing is, I see most of your reactions as- "It didn't go 'my' way so, it must be still wrong, even though numerous courts reviewed it." Had it gone the other way, you would be happy, right? So your satisfaction was already predicated on how the SCOTUS decided.

I don't know if you're lumping me in with the "most of you," but if you are you're mistaken. For starters, I'm substantially more qualified to know whether any court got it right or not than most commenters on this thread are, just like you're more qualified on issues of automotive design than I am. Unfortunately, not being involved in the case, I don't have access to any more information than what shows up in the press or publicly available documents.

Second, it was not reviewed by multiple courts, it was reviewed by one (the 2d Cir.), and then only by a single panel. The Supreme Court refused to review it, meaning that fewer than four Justices were interested in hearing it. This means that six or more of our Justices didn't think this was an important enough issue for them to spend time on. Given the amount of attention it's received, I must respectfully disagree. I'm not one of those who thinks there's necessarily a conspiracy behind this, but I do think it merits review.

Fourth, I, like you, would have liked to see a more thoughtful analysis than was done by the BK court or the 2d Cir.

Fifth, having AmJured Constitutional Law many years ago, and maintaining a more than passing interest in the subject to this day, I have strong, highly informed, opinions on how many Supreme Court cases should be decided. Sometimes they get it right and sometimes they get it wrong (in my opinion). Even when they actually rule on an issue (which they didn't do here) I don't always agree, and, I've been at this long enough that one or twice they've eventually "come around" to my position. (Incidentally, this happens with certain appellate courts with alarming frequency.)

The Supreme Court doesn't always get it right. The more you know about S.Ct. jurisprudence, the more likely you are to accept the fact that they miss from time to time. That's the whole point of my pithy quote above about finality and infallibility.

alfadriver wrote: Whereas, I honestly don't know how much of the actual deal was done outside of the court, which makes it's part appeal not reviewable.

That's not an accurate statement, but is close to what I think is at the root of this. Most of the bondholders (something like 90%) agreed to the deal, with the IN bondholders being among those who didn't. My personal reading of the tea leaves is that this is the reason the Supremes weren't interested in reviewing it. Unfortunately, the petitioners got taken along for the ride against their will. I find this offensive, because they were basically forced into a settlement against their will. While there are mechanisms for this to happen in BK litigation, I remain unconvinced that it was done by the book here.

alfadriver wrote: RE- the pensioners- I've also read articles that pointed out that many of the bond holders bought the bonds at distressed rates, ... the $.32/dollar was actually $.32/.42, well above what all the unsecured debt holders got....

This argument (which was originally presented right after the BK petition) is the best I've seen in favor of the fundamental fairness of the deal. However, not being privy to the entirety of the negotiations and proceedings, I'm not entirely convinced it's the correct legal result. That's the source of my heartburn.

alfadriver wrote: So you can continue to assume that you are right, based on your ideas, and whereever you get your facts, or you can have more of an open mind to think that you may be wrong, and the courts got more of it right that you think. There are "experts" writing opinions to both sides. Unless you are a bankruptcy lawyer, I seriously doubt you know any more than what you are being told.

I understand better than most that virtually any legal issue that gets litigated has good arguments on both sides. Moreover, my mind is more open than most, because I spend most of my time trying to think of the best arguments on the other side of more complex legal issues than this so I can rebut them. That said, I'm not a bankruptcy lawyer, but I certainly know more than what I'm being told.