A warning shot for General Motors

Remember those hedge funds that refused to make a deal with the government on Chrysler? They don't appear to be having any more success with the bankruptcy judge than they were with President Obama.

From the Financial Times:

A U.S. bankruptcy judge has rejected an attempt by dissident Chrysler creditors to derail the sale of the ailing carmaker's viable assets to a group of new shareholders, including Italy's Fiat.

In a ruling at 11pm EDT, Judge Arthur Gonzalez approved the process for the sale, which requires final court approval by May 27, as "appropriate and necessary."

He overruled objections from a group of creditors who oppose the sale and who argued that the guidelines set out restrict competing bids.

Of course, the creditors do not actually oppose the sale. They oppose the amount of compensation that they will receive for their Chrysler debt holdings in the event of a government-brokered sale. They want more. But that's nitpicking. The more important takeaway from this exercise is not what it means for the 20 or so hedge funds that are hopping mad about a deal that they claim in a court filing "was orchestrated entirely by the Treasury and foisted upon (Chrysler) without regard to corporate formalities, the fiduciary duties of (Chrysler's) officers and directors, or other important checks and balances typically found in good faith sales." Far more critical is whether General Motors' bondholders are paying attention -- and I'm sure they are.

Because they're being presented with a pretty clear demonstration of the inadvisability of saying no to the Obama administration at this juncture. I'll lay odds right here, right now: G.M. will avoid bankruptcy, because the bondholders will know they have no choice but to make the best deal they can.