Today's Chrysler Court Docs II: When Bailouts Collide: Chrysler Financial Vs. GMAC

Toxicroach clocks in with today’s ChryCo court action. And here’s one from left field: Chrysler FInancial attempts to short-circuit the plan—put forward by the President of the United States no less—to transfer all of the zombie automaker’s business to GMAC. Turns out they would do anything for love, but they won’t do that.

“Chrysler Financial got into the act today, objecting to GMAC providing financing going forward ( download pdf here). First, they complained about the celerity of the proceedings. Then they pointed out that Chrysler Financial has liens on, oh, all of the Chrysler product on dealer lots, and that the agreement with the dealers prohibits them from financing through anyone else. Since the dealers are not debtors in bankruptcy, the court can’t really protect them. Chrysler Financial’s remedy: kick GMAC to the the curb, replace them with Chrysler Financial. Failing that, let ChryFi see the terms of the agreement between GMAC and Chrysler proper (which had previously been sealed by the court to protect competitive information). The Non-TARP bondholders also filed a motion to protect their identities because Obama is defaming their reputation! The judge shot that down fast. Looks like we will get to find out who all the non-TARP bondholders are by tomorrow at 10 a.m. ( download opinion here).

Bridgestone Tire filed an objection to sale on the grounds that if the deal goes down as stated, NewCo would be able to demand tires from Bridgestone for 90 days, and then stiff them without any liability by rejecting the contract. This is a technical objection and really shouldn’t be too much of a hurdle ( download pdf here).

The non-TARP bondholders filed a supplemental objection to the bidding procedures, arguing that they are essentially designed to make sure that nobody except NewCo can successfully bid on anything at all ( download pdf here). For instance, any non-NewCo bidder would have to put 10% down on any proposed purchase price, they have to accept the UAW agreement, and that all bids be for the whole thing or not at all (no sniping Jeep, for instance).

That’s the action as of 7p.m. today. My gut is that the Chrysler Financial thing might be a big deal. They pretty much have to win this or die, and they have lots and lots of security against parties that are not subject to the automatic stay. Has a company ever stabbed its ex-in house bank in the back before, while the bank held liens on all of their product? Did the government spurn Chrysler Financial?

I’d also like to point out that if not for Uzzi and the non-TARPies, Chrysler’s Sunday night ambush may well have worked. The other objections to the motion didn’t hit the court until Tuesday. If not for Uzzi throwing a monkey wrench in the works, the order may well have been entered already setting the course for the sale. The sale procedure in the original motion would require objections to be filed by the 15th for most creditors, and the final hearing on the 21st.

Keep in mind that under the local rules, the Monday hearing would have had to happen on May 25th, much less the final hearing. Whether you think it’s a good thing or not, Uzzi and the non-TARPies appear to have sapped enough momentum to give the other creditors a chance to get their bearings and get their lawyers slowing things down too.”