Expert: Chrysler Plan Could Wreck Capital Markets

Newswise — The federal government's Chrysler restructuring plan poses a major threat to capital markets, and Indiana pension plans are correct in opposing it, says a finance expert at the University of Indianapolis. The Chrysler proposal would pay just 29 cents on the dollar to secured creditors while paying billions to unsecured creditors, such as the United Auto Workers union. Such a move would violate the most basic ground rules that guide investors, says Matt Will, associate professor of finance at UIndy. "It disrupts 100 years of bankruptcy law," Will says. "Instead of being first in line, you're last in line." On Tuesday, papers were filed in US Bankruptcy Court on behalf of the Indiana State Police Pension Trust, the Indiana State Teachers' Retirement Fund and Indiana's Major Moves Construction Fund, objecting to the proposed sale of most Chrysler assets and seeking appointment of a trustee to protect stakeholders' rights. The funds include the retirement assets of approximately 100,000 public employees and their families. Will says the Chrysler plan, if allowed to proceed, will undermine investor confidence at a time when capital is desperately needed. For example, Indiana Treasurer Richard Mourdock announced earlier this week that funds under his control would no longer invest in businesses receiving federal bailout money. "This is an economy-destroying deal," Will says. "It destroys the capital markets, because investors will pull their money out." Will holds a doctorate in business administration and previously taught for nine years at Johns Hopkins University. He is a member of the Indiana State Corporate Law Survey Commission and host of the weekly radio show "Your Money" on Indianapolis station WICR-FM/HD.