Chrysler, third biggest among U.S. automakers, filed today for bankruptcy protection to streamline operations in a reorganization that includes Italy’s Fiat SpA as a partner. The bankruptcy case, which officials envisioned as a “surgical” process, will have its first hearing tomorrow (Friday) morning. Here is an in-depth look and analysis on the Chrysler bankruptcy.
The carmaker tried to convince its lenders to reduce $6.9 billion in secured loans but some lenders refused to slash the debt to $2.25 billion. Pres. Obama, during a noontime appearance at the White House, was critical of investment funds that rejected the Treasury’s settlement offer.
One thing worth pointing out though is that the reason lenders rejected Treasury’s $2.25 bln offer – wasn’t because the amount wasn’t high enough. The lenders argument was they bought this debt with the understanding that they were having first security rights in bankruptcy and that they should get 100% of the dollar before any of the unsecured lenders get anything. The union (UAW) is an unsecured lender, yet it’s getting 55% of Chrysler. They are basically getting paid before the bondholders.
