Either way, the secured bondholders wouldn't get 65%
1) The "secured" bondholders weren't going to get 65 cents on the dollar if Chrysler went Chapter 7. There's a glut of car manufacturing capacity in the US, and who would want Chrysler's factories, brands, and office buildings in Michigan now?
Consider this BW story from 2007 - http://www.businessw...7_10/b4024056.htm - before Daimler spun it off.
Private equity firms see substantial breakup value in Chrysler alone. The Jeep brand plus its factories could bring $5 billion to $7 billion. At least a few of Chrysler's plants would be of interest to Hyundai Motor, Chinese automakers, Renault-Nissan, India's Tata Motors, and possibly Volkswagen. DaimlerChrysler Financial Services, almost a forgotten asset, earned about $2 billion last year. The wild card? A private buyer would have to negotiate UAW worker buyouts and figure out who pays for it.
That was when the economy was still growing. All of those manufacturers, perhaps excluding the Chinese, are hurting. Jeep sales were down 49% in January compared to a year earlier - http://jeepworld.wor...-2009-are-brutal/
Chrysler is worth almost nothing in this environment. Recall that FIAT has proposed to pay $0 for its proposed merger/buyout, and that's with Uncle Sam and others putting in a bunch of money. The only potential way to get any value out of Chrysler is to give it some breathing room and dramatically restructure it.
2) If Chrysler goes under in an uncontrolled way, GM will be hurt even more, as will Ford and other comparably healthy US manufacturers because they have many of the same suppliers. Letting them simply go belly up isn't on the table. They may never exist as a US manufacturer again, but at least the disassembly will be a controlled process with more interests being considered than just a fire-sale to satisfy a few of the bond holders.
Bankruptcy judges do this kind of stuff all the time. If Obama's proposal is so onerous then the courts will slap the proposal down.
FWIW.
Cheers,
Scott.