Fund Managers Burned by Obama Now Say They Are Wary (Update3)

[thundley4]

"May 20 (Bloomberg) -- Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC’s bankruptcy.

Obama put Chrysler under court protection on April 30 after lenders balked at a proposal giving them about 29 cents on the dollar for their $6.9 billion in debt. The investors said the president’s plan favored a union retiree medical fund whose claims ranked behind them for repayment. It was offered a 55 percent equity stake in the automaker.

Pacific Investment Management Co., Barclays Capital and Fridson Investment Advisors have joined Schultze Asset Management LLC in saying lenders may be unwilling to back unionized companies with underfunded pension and medical obligations, such as airlines and auto-industry suppliers, because Chrysler’s creditors failed to block Obama’s move. The reluctance may put additional pressure on borrowers seeking capital in the worst financial crisis since the Great Depression.

“Lenders will have to figure out how to price this risk,” Schultze, 39, said in a telephone interview from his office in Purchase, New York. “The obvious one is: Don’t lend to a company with big legacy liabilities or demand a much higher rate of interest because you may be leapfrogged in a bankruptcy.” Link

Another unintended consequence of this administration.

[NHSparky]

And guess which other kinds of companies are heavily unionized which rely on investment?

Utilities, for one.  Whoops--there goes that infrastructure improvement.

Ditto for anyone who wants a state/federal contract to work on roads, bridges, buildings, etc.

Something tells me Obama just figured he wave the hand of the "Magic Negro" and all would be immediately wonderful.  Now that we (and eventually, he) realize it's getting WORSE, not better through his actions, we're gonna see some serious spin and panic kicking in over the next couple of years.

[thundley4]

This will also hurt the one remaining US car maker that is not under the thumb of 0Bama, Ford.  Since they can't rely on the government for the heavy investment that will be needed to achieve the new CAFE standards, will be be deeply affected by this.