Chrysler C11: "Non-TARP" Lenders Balk; One Day Delay Granted; Death Threats?
Toxicroach will be here any moment to give us his take on the Chrysler C11 case’s “relax don’t do it” anti-auction action. Meanwhile, here’s a quick heads-up [via Bloomberg]: “The group, calling itself Chrysler’s non-TARP lenders, in reference to the Troubled Assets Relief Program, said the proposed sale to an entity to be managed by Fiat is ‘tainted’ because the process was dominated by the U.S. government, according to papers filed today in U.S. Bankruptcy Court in Manhattan. The group also said the short period of time given to evaluate the sale was improper and the hearing set for today on the bid procedures should be delayed.” And so it was. For a day. Meanwhile, the money shot: “The court should not permit a patently illegal sales process to go forward.” As TTAC reported earlier, the kvetching could well be a simple negotiating ploy to force the feds to pay off the non-TARPies, at a higher rate than the big banks (no less).
I’m no bankruptcy lawyer (I just play one on the internet). And I reserve the right to delete this observation if our experts body slam my logic. But I reckon this opening salvo highlights the holdouts’ realization that Chrysler’s assets are virtually worthless. Otherwise, they’d bitch about the price rather than the process. Which they might do anyway, later.
Meanwhile, it’s not just personal. It’s political. According to the papers, the government deal forces Chrysler to “manufacture the type of smaller cars the Government wants manufactured, satisfy the demands of union laborers, and protect the Government’s investment in Chrysler—all components of a political agenda imposed on Chrysler’s management.”
Again, federal bankruptcy judge Arthur Gonzales granted the non-TARPies motion for a one-day delay so they could see what the government plan is really all about. And why not? As the Detroit Free Press reports, this is some serious shit right here.
Today’s hearing also included a request from the lawyer representing the lenders opposing Chrysler’s plan to keep their identities secret for some time, saying the investors who were public had received death threats . . .
Lauria said while the group included two known members— Oppenheimer Funds and Stairway Capital—it had other members who wanted to remain unknown for some time longer.
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NBK, You make an excellent point, perhaps my accusation is too soon, since the issue has not yet been decided. We will have to see if they have or will try to really break the rules. However, the behavior to date is already changing the rules anyway, and they know it, and they don't dislike it. As PCH points out, the bully pulpit and other government powers are PRECISELY weapons no one wants to have to fight. So if you are someone who lends money, do you now figure in your risk assessment the possibility that the borrower may later go to the US government for help, thus involving a party that will push your debt down the ladder, whose power can threaten you with all sorts of bad things, and who has already shown they are willing to call you out as a bad guy for simply standing up for your investors (as you are contractually, and sometimes legally required to do)? Well, if you don't now take these things into account, you are an irresponsible fool who has no business managing money. So, with all the talk about increasing the free flow of credit, they are actually doing precisely the wrong things. Their only hope is that the idiots who bought all the mortgage paper didn't wise up and learn anything.
Landcrusher, this is the way it has always been. The only difference is that it is now the state. Normally a company lends money without security. When it gets into trouble its lenders will start to demand secured loans so when the company goes tits up the secured loans will be paid off and the old, unsecured creditors will remain unpaid