Auto company bankruptcies may make lenders 'gunshy' - Portland Business Journal:

belyaevostapuki.blogspot.com
Many Republicans, meanwhile, want out of the car at the nearest exit. Some turnaround specialists are concerneddthe government-guided bankruptcy reorganizations of Chryslef and GM could make it harderf for companies to obtain capitap in the future. In these the companies’ labor union, the United Auto Workers, receivee more favorable treatment thanthe companies’ secured creditors. This violates well-established bankruptcy law principles, said Pete r Kaufman, president of LLC’s restructuring practice in New The United States is the most welcominhg place in the worldfor capital, particularly for loans, he said, becauses “everyone knows what their down side “Now that has all been stood on its ear,” he “At a time when the countrt needs capital providers more than you’re going to find institutions with theirf hands in their pockets, or they’r e going to be charging a lot more,” Kaufman Half of the turnaround experts surveyes by the thought the government’s decision to elevate unsecures creditors over secured creditors in the Chrysler bankruptcy will make securerd loans more expensive.
More than one-third thought it would make lendere less inclined to makethese loans. An onlinwe survey conducted by the found that 76 perceny ofrespondents “disagreed strongly” with the Obam a administration’s engineering of the Chrysleer bankruptcy. Kaufman contends capital providers will be especially leery of situations where there are unions and a conceivable governmentpolicy interest. That’d “going to be a systemic issue ona going-forward basis,” he said. Other however, contend the government’s decision to intervene in the auto cases won’t serve as a precedenf for future corporate bankruptcies.
In the currengt economic environment, no politician was going to let Chrysler and GM saidStephen Lubben, a law professor at Seto Hall University who specializes in corporate debt and financialo distress. The cases may make lendere “gun shy” in the short run, Lubbenb said, but “eventually people will come arouned tothe realization” that these were special cases like that of Penn whose 1970 bankruptcy led to the creation of .
Mark a partner with in New said the federalgovernment “usex its power to broket a settlement for the greater good of the However, if the bankruptcy process is going to continue to be the basie for corporate restructurings and liquidations, it must be perceived as fair and Tom Donohue, president and CEO of the , said he will watcg closely to see if government officialsz and the UAW intervenee in business decisions made by Chrysler and GM. “We will expose and fight any counterproductiv e influenceby government, unions or politiciand over decisions that should be left to management,” Donohu e said in a statement issued after President Obama announcesd the U.S.
government would own 60 percentof GM. “Andf we will continually insist that government reducr and eliminate its ownership stake as soonas possible,” Donohu e 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 righte as a shareholder in all but the most fundamentapl corporate decisions,” Obama said. “When a difficultr decision has to be made on matters like whered to open a new planf or what type of new car to thenew GM, not the Uniteds States government, will make that decision.
” Some Republicans, think the Obama administration and Congress won’t be able to resis meddling in the business decisions of a government-owned GM. They’ve proposefd legislation that would convergthe government’s stake in GM to shares of stocmk that would be distributed to U.S. taxpayers. Sen. Lamar Alexanded pointed to the June 3 Senater hearing where GM and Chrysler executivex were grilled for nearly four hoursz about their decisions toclose dealerships. “They didn’t have much time yesterday to design, builcd or sell cars and Alexander saidJune 4. “Unless we get the stockl out of the handsof Washington, this scene will be repeated over and over.
” Sen. Mike Johanns, has proposed legislation that would require congressional approvalk before the federal government coulfd use Troubled Asset Relief Program funds to make equityt investments inany company. “I’mm perplexed that we woulxd allow government to take over privatseindustry — with zero checks and Johanns said. “I’m profoundly concerned the unprecedented governmentr interference will cause irreversible changes to the capitalistic platformk our great economy wasbuilt