This, from Larry Summers' CFR talk today, sounds about right to me:
Mr Summers defended the administration’s handling of the Chrysler bankruptcy – in which union creditors received better terms than debtholders who had more senior claims, alarming many investors who see the order of creditor seniority as a crucial underpinning of finance.
He said it was “standard practice” for providers of capital to bankrupt companies to favour some creditors whose goodwill was important to future business success. All creditors were getting more then they would have if Chrysler had been liquidated.
I've never been able to figure out why that last point isn't a trump card in this argument. Particularly since it was the whole reason a lot of investors snatched up Chrysler debt when it got really distressed.