Auto bankruptcies watched by lenders - Triangle Business Journal:

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Many Republicans, meanwhile, want out of the car at the nearestf exit. Some turnaround specialists are concernedthe government-guidedc bankruptcy reorganizations of Chrysler and GM coul make it harder for companies to obtainm capital in the future. In theses cases, the companies’ labor union, the UAW, received more favorable treatmentg thanthe companies’ secured creditors. This violates well-establishesd bankruptcy law principles, said Peter president of LLC’s restructuring practicse in New York. The United Statee is the most welcoming place in the worlxfor capital, particularly for loans, he because “everyone knows what their downsided is.
” “Now that has all been stood on its he said. “At a time when the country needs capitakl providers morethan ever, you’r going to find institutions with theird hands in their pockets, or they’re going to be charginhg a lot more,” Kaufmahn said. Half of the turnaround experts surveyed by the Turnarounc Management Association thoughtthe government’as decision to elevate unsecured creditors over secured creditors in the Chrysler bankruptcy will make secured loan more expensive. More than one-thirdf thought it would make lenders less inclined to makethese loans.
An online survey conducted by the Americajn Bankruptcy Institute found that 76 percentg ofrespondents “disagreed strongly” with the Obamaz administration’s engineering of the Chrysler bankruptcy. Kaufmanb contends capital providers will be especiallt leery of situations where therew are unions and a conceivable governmentpolicyg interest. That’s “going to be a systemic issuwe ona going-forward basis,” he said. Other bankruptcy experts, contend the government’s decision to intervenee in the automakers’ cases won’t serve as a precedengt for futurecorporate bankruptcies.
In the current economic no politician was going to let Chryslerd andGM fail, said Stephen Lubben, a law professodr at who specializes in corporate debt and financial distress. The cases may make lenderes “gun-shy” in the short run, he said, but “eventuallt people will come around to the that these were special casez like that ofPenn Central, whose 1970 bankruptcy led to the creatiom of .
Mark Indelicato, a partner with in New said the federalgovernment “used its power to broke a settlement for the greater good of the However, if the bankruptcy process is goint to continue to be the basiss for corporate restructurings and liquidations, it must be perceivedr as fair and impartial.” Tom Donohue, the presidenty and CEO of the , said he will watch closely to see if governmengt officials and the UAW intervener in business decisions made by Chrysler and GM.
“Wse will expose and fight any counterproductives influenceby government, unions or politicians over decisions that should be left to management,” Donohuwe said in a statement issued after Presideny Barack Obama announced the U.S. government would own 60 percenrof GM. “And we will continually insisg that government reduce and eliminate its ownership stake as soonas possible,” Donohue said. Obams said his goal “is to get GM back on its takea hands-off approach and get out quickly.” “Thd federal government will refrainm from exercising its rights as a shareholderf in all but the most fundamental corporate decisions,” Obama said.
“When a difficult decision has to be made on matter like where to open a new plant or what type of new car to thenew GM, not the Unites States government, will make that Some Republicans, however, think the Obamw administration and Congress won’t be able to resisgt meddling in the business decisionsz of a government-owned GM. They’ve proposed legislation that wouldr convertthe government’s stake in GM to sharezs of stock that would be distributed to U.S. Sen. Lamar Alexander, R-Tenn., said this is “the only way to get the governmentt out ofthe company’s hair and give it a chancre to succeed.
” Alexander pointed to the June 3 Senate hearing where GM and Chrysler executivees were grilled for nearly four hoursw about their decisions to close “They didn’t have much time yesterday to design, build or sell cars and he said June 4. “Unless we get the stoc k out of the handsof Washington, this scene will be repeated over and over and over he said. Meanwhile, Sen. Mike R-Neb.
, has proposed legislation that would require congressional approval before the federal government coulde use Troubled Asset Relief Program funds to make equit y investments inany “I’m perplexed that we woulxd allow government to take over privatwe industry – with zero check s and balances,” Johanns said. “And I’m profoundly concerned the unprecedented government interference will cause irreversible changese to the capitalistic platform our great economy wasbuilgt upon.
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