Politics trumps seniority for bondholders in GM, Chrysler bankruptcies


Bondholders, who traditionally end up with the best deal in bankruptcy proceedings since they hold senior debt, appear to be losing out in both the Chrysler and GM bankruptcies. In an unusual twist, the government and employees will likely end up with a bigger share of the two companies as political expediency trumps traditional bankruptcy laws.

"They are rewriting law, and certainly bond markets never priced in an interpretation that you can rewrite things because it's in the best interest" of unintentional stakeholders -- taxpayers, the company's employees, and municipalities that will be affected, Kingman Penniman, president of KDP, told MarketWatch.