Hedge Funds Force Chrysler into Bankruptcy

[MoparDan]

Not from what I've heard on the radio. According to NPR, they claim the loss and don't have to report the insurance payout as profit, since it technically wasn't profit.

From Investopedia:
Hedge funds lie at the active end of the investing spectrum as they seek positive absolute returns, regardless of the performance of an index or sector benchmark. Unlike mutual funds, which are "long-only" [[make only buy-sell decisions), a hedge fund engages in more aggressive strategies and positions, such as short selling, trading in derivative instruments like options and using leverage [[borrowing) to enhance the risk/reward profile of their bets.

This activeness of hedge funds explains their popularity in bear markets. In a bull market, hedge funds may not perform as well as mutual funds, but in a bear market - taken as a group or asset class - they should do better than mutual funds because they hold short positions and hedges. The absolute return goals of hedge funds vary, but a goal might be stated as something like "6 to 9% annualized return regardless of the market conditions".

Investors, however, need to understand that the hedge-fund promise of pursuing absolute returns means hedge funds are "liberated" with respect to registration, investment positions, liquidity and fee structure. First, hedge funds in general are not registered with the SEC. They have been able to avoid registration by limiting the number of investors and requiring that their investors be accredited, which means they meet an income or net worth standard. Furthermore, hedge funds are prohibited from soliciting or advertising to a general audience, a prohibition that lends to their mystique.

In hedge funds, liquidity is a key concern for investors. Liquidity provisions vary, but invested funds may be difficult to withdraw "at will". For example, many funds have a lock-out period, which is an initial period of time during which investors cannot remove their money.

Lastly, hedge funds are more expensive even though a portion of the fees are performance-based. Typically, they charge an annual fee equal to 1% of assets managed [[sometimes up to 2%), plus they receive a share - usually 20% - of the investment gains. The managers of many funds, however, invest their own money along with the other investors of the fund and, as such, may be said to "eat their own cooking".

[ccbatson]

Legitimate but risky practices all. What is not legitimate? Trying to steal their rights to moneys owed them in order to take it for the government, or give it to corrupt cronies in organized labor.

[Detroitej72]

How about the fact they make their money by letting a company fail in order to liquidate it buy selling off its asset's. While not illegal, it sure is questionable on moral grounds, but I suspect these folks care little about morals.

[ccbatson]

Not at all...a business is about making money/profits. If the company is worth more broken up then functioning, then it was a relative failure and these hedge funds were clearing the way for more competitive businesses.

[MoparDan]

And how do we know that these hedge funds participants aren't foreign governments or their agents? Particularly since they're so secretive & non-regulated. They leverage enough against a good company to drive down the stock price & eventually force it into bankruptcy. That is just one reason why they need to be regulated.

[MoparDan]

Seems a few of these creditors are finally seeing the light.
http://www.freep.com/article/2009050...draw+objection

2 Chrysler debt holders withdraw objection



By Justin Hyde and Greg Gardner • Free Press Business Writers • May 8, 2009

• Two of the five debt holders opposing Chrysler LLC's bankruptcy withdrew their objections to the automaker's reorganization today, dealing what may be a near fatal blow to the case argued by investors holding out for more money.

Oppenheimer Funds and Stairway Capital were among the five holders carrying $295 million of Chrysler's $6.9 billion in secured debt -- loans backed by the company's assets -- that had objected to the plan drawn up by the Obama administration's auto task force to give debt holders $2 billion in cash for canceling the loans.

But in a statement today, the two firms said that the opposition to Chrysler and the Obama administration's plan had shrunk to where it was unlikely they would prevail.

Oppenheimer "has determined that the senior creditors can no longer reasonably expect to increase the recovery rate on the debt they hold by opposing the task force’s restructuring plan."

Stairway said it remained "steadfast in our view that there should be significantly more value attained, given a normal course bankruptcy negotiation. The fact simply is, however, our group has become too small to have a voice within the bankruptcy."

The departure leaves three remaining holdouts: Schultze Asset Management, Group G Capital Partners and Foxhill Capital Partners.

The group revealed itself Wednesday after U.S. Bankruptcy Judge Arthur Gonzalez denied its request to keep the funds' identities from public view. Attorneys for the group say they have received threats ever since President Barack Obama sharply criticized holdouts to the government’s plan.

The holdouts argued that the government's plan illegally gave too much of Chrysler's value to the UAW retiree health-care trust fund and other creditors who would normally be paid in an bankruptcy case after secured loans were settled.

The group told the court earlier this week that it would lose money on its loans under the offer, and that they held no credit-default swaps – insurance that would have paid for some of their losses in case of a Chrysler default.

Lawyers for the group said there are other investors who oppose the deal but chose not to join the group in court because of the public reaction. The group failed Tuesday to halt the bidding process for Chrysler to sell most of its assets to a new partnership with Fiat SpA.

Contact JUSTIN HYDE:202-906-8204 or jhyde@freepress.com.

[MoparDan]

Hedge Funds cave in!!
http://www.allpar.com/news/
Chrysler creditor group throws in the towel

May 8th, 2009
by Bill Cawthon
The Chrysler Non-TARP Lenders Group has disbanded. The small group of creditors that had been objecting to Chrysler’s merger with Fiat and quick exit from bankruptcy has given up its challenge after rising defections and declining influence meant “it wasn’t sensible to proceed� in the words Glenn Kurtz of White & Case, the group’s attorneys.
The dissolution of the group ends the most serious challenge to Chrysler’s completing its bankruptcy plan within the original 30- to 60-day period originally envisioned.

[rb336]

good news. thanks for the update

[MoparDan]

good news. thanks for the update

No problem at all! Allpar is really good about getting inside scoops. Now lets see if this bankruptcy proceeding will be expedient.

[ccbatson]

It is good news that the State underhandidly destroys private interests? How long before they do the same to everyone else? Liberty is under threat.

[Patrick]

Schultze Master Fund Ltd and Apex Master Fund 3000, Purchase, NY
Arrow Distressed Securities Fund, Purchase, NY
Stairway Capital Management II, L.P., Uniondale, NY
Group G Partners LP, New York, NY
GGCP Sequoia L.P., New York, NY
Oppenheimer Senior Floating Rate Fund and Master Loan Fund, New York, NY
Foxhill Opportunity Master Fund, LP., Princeton, NJ

Come on now...the East Coast loves us Midwestern rubes.

[ccbatson]

And the regular folks who just lost their investments carried by these entities?

[Stosh]

What about the 'regular folks" that lost their asses in the stock market? Losing their jobs? Something tells me that these are, for the most part, not regular folks. And some of the hedges are only losing about 10-12 cents on the dollar, having bought the note for not much more than that.

[ccbatson]

Apples and oranges....Obama did not out "the stock market" as evil in a speech.

Well, OK, that may be debatable, but it is still a different subject

[Stosh]

The hedges are evil, because of the fact that they are betting upon bankruptcy to further their profit. It's easy to just sit back and wait for your credit swap to come in.

[ccbatson]

Once again....the people that have investments as part of a balanced portfolio in some hedge funds are evil? Teacher's pensions as one example.

[Stosh]

Just a small portion of it. They will make it up in some other area. Actually, they only used the rich doctor's portion of the fund to invest, not the schoolteachers.

[Lorax]

It is good news that the State underhandidly destroys private interests? How long before they do the same to everyone else? Liberty is under threat.

So in your view, it's OK for wealthy sludge fund managers to screw working class people, but somehow stopping them threatens liberty? It's private interests that are the threat to liberty, what do you think this depression is about? These people represent no one but legacy-wealth families sitting on their asses by the pool with a laptop and an attitude. They can go screw themselves.

[MoparDan]

From Investopedia
http://www.investopedia.com/terms/h/hedgefund.asp

What Does Hedge Fund Mean?
An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns [[either in an absolute sense or over a specified market benchmark).

Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year.

Investopedia explains Hedge Fund
For the most part, hedge funds [[unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies.

[Lorax]

Thanks Dan for clairfying what CCBatty has a hard time doing, since he's perpetually choking on his fascist KoolAid.

Hedge funds are nothing more than legalized high-stakes gambling for rich, indulgent, greedy s.o.b.'s who's only regard is for the thrill of quick profits at the expense of middle-class America.

Fully sanctioned by the repugnican wing nuts, full of those precious Phil Gramm and Dick Cheney touches.

And Lush Limbaugh, the Caftan Warlord of the Fascist Right has a golden microphone there to catch the last gurgles, and FOX has techincolor to photograph the red, swollen tongues.

[CapitalistPig]

The title of this thread is patently false! Hedge Funds cannot force a company to do anything! Are hedge funds going to force google and apple in BK? No, they are profitable companies.

If a business isn't making a profit it will fail! Plain and simple. Chrysler should have failed decades ago. Delaying the inevitable hurts middle America more than anything else. There is nothing wrong with failure. Government propping up dead companies hurts the tax payer in the end. With failure comes rebirth, new jobs, and new inventions.

One question: What has government invented or produced?

Government get out of the way so we can get back to work!!

[CapitalistPig]

Since I just crushed this thread, I'm starting a new thread, entitled: Why is Michigan the worst state to do business in? Look it up. You might learn something!

[ejames01]

Another new guy is here to educate us.

Since I just crushed this thread, I'm starting a new thread, entitled: Why is Michigan the worst state to do business in? Look it up. You might learn something!

[CapitalistPig]

Another new guy is here to educate us.

whats wrong with learning something? you must be the superintendent of DPS. keep the kids uneducated so you can keep feeding them government cheese in exchange for votes.

[Stosh]

Another compelling reason for the ignore feature.