U.S. Treasury Hearts Fiatsler

by Robert Farago

May 1st, 2009 7:45 AM

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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Pch101 on May 01, 2009
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.

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HarveyBirdman on May 01, 2009

@dgduris 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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