By on June 9, 2009

Sergio Marchionne’s statement that “we would never walk away” from the Chrysler deal may not be having quite the effect he wanted. After all, the entire justification for the Government cramdown of bondholders and “auction with one bidder” sale to Fiat is that Chrysler will unravel if the the sale isn’t implemented post-haste. In a new filing to Supreme Court (PDF via SCOTUSBLOG), the Indiana funds argue that:

The Debtors (and the United States) have advanced the position throughout this case, including in its papers filed with this Court, that the section 363 Sale at issue here had to close before June 15 or Fiat would exercise its right to withdraw and the entire transaction would collapse. The courts below relied on such arguments and testimony in moving this case forward at an unprecedented pace . . . Whether or not these arguments and testimony were ever true, the Indiana Pensioners respectfully submit that the risk of termination by Fiat if the transaction does not close by June 15 no longer provides a basis for driving the timing of these proceedings.

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17 Comments on “Indiana Pension Funds Jump On Marchionne’s Promise...”


  • avatar
    menno

    Once again, the law of unintended consequences strikes! Heh heh.

  • avatar
    Mr. Sparky

    Sergio Marchionne… The new Robert Lutz!

    I suggest we rename the Lutzies the Sergios.

  • avatar
    psarhjinian

    Question: should FIAT walk away and, in all likelihood, Chrysler enter Ch.7, what do these bondholders think they’re going to get?

    More to the point, what would they have gotten had the Federal government not facilitated the FIAT takeover and just let them die?

    I ask because the answer would appear to be “effectively nothing” in either case.

  • avatar
    John Horner

    Marchionne may have killed the deal with words he intended to buttress it with. Oops.

    Has Indiana noticed what the market for deeply troubled automotive design, manufacturing and marketing assets is?

  • avatar
    wsn

    psarhjinian :
    June 9th, 2009 at 12:51 pm

    Question: should FIAT walk away and, in all likelihood, Chrysler enter Ch.7, what do these bondholders think they’re going to get?

    ——————————————-

    100% back if you are the first in line and your investment claim is smaller than the scavenge value.

    I don’t know about Chrysler, but with GM’s filing, they claim that they have 90B in asset and 170B in debt (roughly, but won’t be too much off). Even if they over-estimated the asset value and let say a C7 auction yields 40B, then those secured debt hold at the front of the line still can expect to get 100% back.

  • avatar
    JEM

    A scenario: Boss O’s minion The Ratt tells Sergio and Luca that the fix is in, you do business with us or there’s no deal. So they sign on the dotted line but maintain a bit of a low profile.

    Meanwhile, their American consigliere are watching the courts, and they crunch some numbers and start to realize that if the courts dismember the carcass they can still pick up the cuts they want cheap.

    So maybe at this point Fiat doesn’t care a whole lot which way the deal goes. Right now they’ve signed up for the Obama Meal Deal, but if they order a la carte at the bankruptcy take-out they can skip the full-fat UAW Shake and they don’t have to listen to Barney Frank’s advice on dealership and plant closings.

  • avatar
    boombox1

    Having lived in Indiana for 7 years, I can say that Hoosiers definitely hold grudges and are some awfully stubborn, cantankerous folks… this is without a doubt payback for the cancelled Chrysler facility of some years back.

  • avatar
    26theone

    The issue is they are putting unsecured creditors in front of secured creditors, hence “the cramdown”.

  • avatar
    Hippo

    Fiat will walk as soon as they have to come up with actual money.

    The whores are playing the same game with Chrysler as GM is playing with Opel.
    Keep hanging around and see what taxpayer money they can abscond with.

  • avatar
    johnthacker

    More to the point, what would they have gotten had the Federal government not facilitated the FIAT takeover and just let them die?

    I ask because the answer would appear to be “effectively nothing” in either case.

    They would have gotten anything that could have been obtained from liquidation, because they’re secured creditors. It doesn’t matter that Chrysler’s liabilities exceed assets; the creditors are the ones to whom the liabilities are owed.

    Even assuming that Chrysler doesn’t actually own their headquarters in Auburn Hills (which I believe is correct; IIRC they sold it to Cerberus and then lease it back), there are assets that would have value in liquidation.

  • avatar
    OldandSlow

    FIAT is not out of any money yet on the deal and should the house of cards fold, they’ll get a say on who gets to own the Jeep brand.

  • avatar
    Mike66Chryslers

    Heh heh, I knew this would happen as soon as Marchionne said that.

  • avatar
    Lumbergh21

    Thank you Indiana, and thank you Sergio.

    We can maintain the Lutzies; Sergio just became the front runner for this year’s award.

  • avatar
    motron

    The Supreme Court injunction was just lifted. The sale can proceed.

  • avatar
    CamaroKid

    The Supreme Court injunction was just lifted. The sale can proceed.

    Yup, darn Republican Justices don’t they know a Obama “cram down” when they see one…
    < sarcasm off >

  • avatar
    Pch101

    there are assets that would have value in liquidation

    Right. But the value is probably in the range of 10-20 cents on the dollar. (Moody’s has estimated the 20 cent figure.)

    They were offered 30 cents, which is obviously more than 20 cents. The creditors have no case if they get a value that exceeds the liquidation value, that’s just how this stuff works.

  • avatar
    Tricky Dicky

    Seems to me that Super-Sergio knew exactly what he was doing: don’t panic on the Indiana issue and reassure that Fiat are serious long term players. The idea that they are just hanging around to get US gov money is so short sighted. Fiat are going to have to invest huge management energy to make a Chrysler turnaround work. There’ll be no ROI on this deal for years and the risks are enormous. That’s hardly the actions of a short term money grabber is it?

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