Auto company bankruptcies might make lenders

doqujamup.wordpress.com
Some turnaround specialists are concernedthe government-guideds bankruptcy reorganizations of and GM coulf make it harder for companies to obtain capital in the future. In these the companies’ labor union, the United Auto received more favorable treatment thanthe companies’ secured This violates well-established bankruptcy law principles, said Petefr Kaufman, president of LLC’s restructuring practice in New York. The United Statese is the most welcoming place in the world for particularlyfor loans, he said, because “everyone knows what their downside is.” “Nowq that has all been stood on its Kaufman said.
“At a time when the country needs capital providerx morethan ever, you’re going to find institution with their hands in their or they’re going to be charging a lot he said. Half of the turnaround experts surveyexd by the thoughtthe government’ s decision to elevate unsecured creditoras over secured creditors in the Chryslef bankruptcy will make secured loans more expensive. More than one-thirdd thought it would make lender less inclined to make these An online survey conducted by the found that 76 percentf ofrespondents “disagreed strongly” with the Obama administration’s engineering of the Chryslerf bankruptcy.
Kaufman contends capital providers will be especiallyt leery of situations where there are unionse and a conceivable governmentpolicy interest. That’s “goinvg to be a systemic issue ona going-forware basis,” he said. But other bankruptcy experts conten d thatthe government’s decision to intervene in the cases won’t serve as a precedent for future corporate bankruptcies. In the currentt economic environment, no politician was goiny to let Chrysler andGM fail, said Stephemn Lubben, a law professor at who specializes in corporats debt and financial distress.
The casees might make lenders “gun in the short run, he said, but “eventually people will come around tothe realization” that these were special cases like that of Penn whose 1970 bankruptcy led to the creation of Amtrak. Mark a partner with LLP in New York, said the federapl government “used its power to broker a settlement for the greated good ofthe economy. if the bankruptcy process is goinyg to continue to be the basis for corporate restructuringsxand liquidations, it must be perceived as fair and impartial.
” Tom Donohue, president and CEO of the , said he will watchy closely to see whether government officials and the UAW intervene in business decisions made by Chrysler and GM. “Wr will expose and fight any counterproductivde influenceby government, unions or politicians over decisionsa that should be left to management,” Donohue said in a statemeng issued after President Obama announced the U.S. governmen t would own 60 percentof GM. “And we will continually insist that government reduce and eliminat e its ownership stake as soon as Donohue said.
Obama said his goal “is to get GM back on its takea hands-off approach and get out “The federal government will refrain from exercising its rightas as a shareholder in all but the most fundamental corporate decisions,” Obama “When a difficult decision has to be made on mattersw like where to open a new plant or what type of new car to the new GM, not the Unitedr States government, will make that decision.
”