By on May 1, 2009

TTAC commentator and bankruptcy lawyer Toxicroach’s hits keep happening. This time, the member of our Best & Brightest sends us a filing by the US government (download pdf here) in support of Fiatsler’s motion to extend its filing (download pdf here).

Check out the Treasury motion in support. I think you will have a laugh a minute with that one. Then you will cry. The lease rejection—quick Google of some of the addresses . . . apparently, $60K a month gets you a Dodge dealership. They are dumping multiple car rental places and dealerships. Must be some pretty lame properties to get rejected on day one.

Not sure if you are reading this altogether, but so far its shaping up that they won’t even file a full petition until well after all the assets are dumped into NewCo. The only real reason I can think of for that is that they want to keep as much in the dark as long as possible (they’ve had months to draw the rest of the petition up. I’m sure its complicated, but it doesn’t take 60 days, and they had plenty of notice. It’s not done because they don’t want it to be done).

The bankruptcy trustee is a politically sensitive job (head regional trustee is a presidential pick); they will not be pressing Chryco very hard. The Department of the Treasury is filing motions in support. The only real resistance will be coming from the creditors, of which about 21 have made their appearance in the case. They have filed a bunch of “statements” from various dealers about how important this is, etc.

The other thing that strikes me is the endless repetition of the sob story; Chryco is so important, 38000 jobs, blah blah, in every motion. You really don’t need that stuff in a motion to pay prepetition wages or reject a lease. Highly dramatic, until you’ve paged through it 6 times.

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11 Comments on “U.S. Treasury Hearts Fiatsler...”

  • avatar

    “Fiatsler” is too hard to type and say – try ‘CryAt’.

  • avatar

    I still like “Fecesiat”.

    Going forward I think Chrysler-branded products will be an order of magnitude worse than anything we’ve seen before.

  • avatar

    This is a good summation of what our President is attempting to accomplish in the Chrysler bankruptcy:

    I truly wonder what shape the country will be in four years from now.

  • avatar

    “The other thing that strikes me is the endless repetition of the sob story; Chryco is so important, 38000 jobs, blah blah, in every motion. You really don’t need that stuff in a motion to pay prepetition wages or reject a lease.”

    No, but you will want it in 2012 when you need to twist arms for those 38,000 Obama votes and that, simply, is what this is all about.

  • avatar

    That girl is so hot…sorry, what was Robert saying?

  • avatar

    From the WSJ this morn…

    “The U.S. government’s restructuring plan for Chrysler LLC is sounding alarm bells for those in the business of lending money who worry that the plan could subvert decades of standing legal precedent and investing principles.

    Banks, hedge funds and other investors that hold $6.9 billion in secured loans are being asked to release their contractual claims over Chrysler’s assets in exchange for a fraction of what they are owed. Many lenders see that as a raw deal, because in the bankruptcy code’s priority scheme, secured creditors are supposed to get paid before unsecured creditors such as employees.

    Investors worry the government-led plan could rewrite the rulebook on corporate restructurings and the entitlements of creditors. They say that could make lending more expensive for corporations, while crimping lenders’ willingness to get involved with companies that have a connection to the government.

    As of late Wednesday, about 20 of the 46 lenders were opposed to the government plan, according to a statement from a group of debtholders. If more than half the lenders oppose the reorganization, the Chrysler deal could be stuck in bankruptcy court for far longer than the government hopes.”

    Given what we learned from the Ken Lewis interview, I am sure that those 20 lenders will be getting a call this morning promising continued trash collection if they fall in line. And if they don’t?!

    Gotta love Chicago-style machine politics. Capiche?


  • avatar

    This is going to be a very interesting thread…thanks RF and Toxicroach.

    Can somebody point out the list of the assets to be dumped? Didn’t see it in the two links.

    It will be very interesting to see what is revealed in Chrysler Realty. This is Chrysler’s AIGFP…where some of the truly bad investment decisions for new company-financed stores are buried. I’ll be looking for the stores given to departed execs under Daimler….

  • avatar

    @ RF and Toxic

    Is it correct to say these are petitions to the Bankruptcy Court? Requests/suggestions if you will.

    Could the Judge modify or strike out any arrangements. Clearly it hasn’t been pre-packaged?

    There is still a lot to argue about, especially from the debt stakeholders which would suggest the finality of the C11 outcome is very much still unclear.

  • avatar
    Richard Chen

    Per Blogging Stocks: some of the smaller Chrysler lenders may have held credit default swaps (Wikipedia), the financial vehicle that was abused to the point of causing the current economic depression. These particular CDS’s were structured to pay out those lenders in the event of a Chrysler bankruptcy. So, C11 may have been in their best interests after all. And, guess what’s thought to be going on with GM and their lenders?

    Heads, they win, tails, we (taxpayers) lose.

  • avatar

    There is still a lot to argue about, especially from the debt stakeholders which would suggest the finality of the C11 outcome is very much still unclear.

    As a practical matter, the new company is going to do what it is going to do. The creditors will try to claim that the new company misappropriated the assets, while the new company will provide evidence to support the $2 billion price. Given the economy and poor market for used automotive factory equipment, I suspect that defending that figure won’t be too tough.

    Meanwhile, the US government will use their own claims on the old company to squeeze the bondholders on that side of the case. Even though the US has a lower priority claim, the court can still cram down the senior lienholder and split up some of the money.

    The bondholders would have been smarter to have taken the last cash offer. Litigation isn’t going to help them, because the new company will keep moving forward, regardless, so they have no leverage.

    Since the good/bad company theory was on the table, they should have seen this coming. It’s hard to pity the stupid; those holding CDS had better hope that they’re worth something.

  • avatar


    That quote from the WSJ accurately captures my deeper-seated fears, which go far beyond the immediate issue of the Chrysler bankruptcy. I was peripherally involved (as an attorney) in a $350M+ commercial loan a couple of weeks ago, and the lending atmosphere is already borderline-toxic. While the government’s stated intent of supporting Chrysler through bankruptcy is to avoid more harm to the economy, drying up the remnants of the commercial lending market will have a far worse effect on our economy.

    Oh, and if I were one of the attorneys that filed that motion for the Treasury, I would be utterly ashamed. While I understand the first 6 pages were written for public consumption and not for the judge, they still have no place in that motion. I imagine that the attorneys who drafted the motion are quite talented, and if they haven’t completely lost their souls, they’re probably feeling at least a twinge of self-loathing today. But such is legal work, eh?

    GREAT stuff, RF & toxicroach; keep it coming.

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