well......
to call a chapter 11 filing "reorganisation" is quite something.
i'm not a lawyer but i went through one of them some years back - as one of the ones that got suckered.
as far as i can see it amounts to this.
a big corporation screws up its business. usually they over-extend on expansion and the cash flow hits the deck because top management got it wrong.
yep, thats the guys who are paid alot of money to get it right.
crysler is a prime example.
building big old tech cars when the trend in the rest of the world has been different for a long time. and buying other car makes for expansions sake - all on credit of course.
so when it goes wrong you just file for chapter 11. that protects you from going bust as long as you can come up with a sensible restructuring - just the way they did it.
now that doesnt look so bad on the face of it. they get access to nech technology, the retired are being taken care of after a fashion and the taxpayer gets a small stake.
but then there is another side:
hidden amongst these guys are all the lil ones like i used to be. small suppliers, service providers, people on short term contracts and so on. usually small businesses which quite rightly are termed "secured" debtholders. that means that under a normal bankruptcy filing your WHOLE debt is secured BEFORE anybody else has a claim.
to bring that "29 cents to the dollar" down to an understandable level:
lets say you supplied widgets and you have invoices outstanding for $ 100,000 - thats alot of money, maybe 2 months turnover for your small company.
these guys under that deal are offering you $ 29,000 - AND it can take years for you to actually get it.
that sucks.
BUT
as usual, the small guy gets stuffed - and i bet alot of the old top managers who got it wrong in the first place sitting in their mansions - they gonna still have a job after your small company making widgets has gone against the wall - AND leaving YOU with massive debts to YOUR own suppliers.
now YOU try to file for chapter 11.
oooops sorry
you're just to small and unimportant.
cheers
http://news.yahoo.com/s/ap/20090608/ap_on_go_su_co/us_supreme_court_chrysler
to call a chapter 11 filing "reorganisation" is quite something.
i'm not a lawyer but i went through one of them some years back - as one of the ones that got suckered.
as far as i can see it amounts to this.
a big corporation screws up its business. usually they over-extend on expansion and the cash flow hits the deck because top management got it wrong.
yep, thats the guys who are paid alot of money to get it right.
crysler is a prime example.
building big old tech cars when the trend in the rest of the world has been different for a long time. and buying other car makes for expansions sake - all on credit of course.
so when it goes wrong you just file for chapter 11. that protects you from going bust as long as you can come up with a sensible restructuring - just the way they did it.
| Quote: |
| Under a deal brokered in the days leading up to Chrysler's April 30 Chapter 11 filing, Fiat will receive up to a 35 percent stake in the new company created by the sale, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.
The United Auto Workers union will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 percent stake. |
now that doesnt look so bad on the face of it. they get access to nech technology, the retired are being taken care of after a fashion and the taxpayer gets a small stake.
but then there is another side:
| Quote: |
| Meanwhile, the automaker's secured debtholders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some of the debtholders balked at the deal, saying as secured lenders they deserved more. |
hidden amongst these guys are all the lil ones like i used to be. small suppliers, service providers, people on short term contracts and so on. usually small businesses which quite rightly are termed "secured" debtholders. that means that under a normal bankruptcy filing your WHOLE debt is secured BEFORE anybody else has a claim.
to bring that "29 cents to the dollar" down to an understandable level:
lets say you supplied widgets and you have invoices outstanding for $ 100,000 - thats alot of money, maybe 2 months turnover for your small company.
these guys under that deal are offering you $ 29,000 - AND it can take years for you to actually get it.
that sucks.
BUT
as usual, the small guy gets stuffed - and i bet alot of the old top managers who got it wrong in the first place sitting in their mansions - they gonna still have a job after your small company making widgets has gone against the wall - AND leaving YOU with massive debts to YOUR own suppliers.
now YOU try to file for chapter 11.
oooops sorry
you're just to small and unimportant.
cheers
http://news.yahoo.com/s/ap/20090608/ap_on_go_su_co/us_supreme_court_chrysler
