The dissident Chrysler creditors have thrown in the towel and basically cleared the way for the government scripted bankruptcy outcome.
A group of Chrysler LLC’s dissident lenders disbanded, representatives said on Friday, removing the last legal hurdle to the automaker’s quest to complete a merger with Italy’s Fiat SpA with U.S. government backing.
“After a great deal of soul-searching and quite frankly agony, Chrysler’s Non-TARP lenders concluded they just don’t have the critical mass to withstand the enormous pressure and machinery of the U.S. government,” said Tom Lauria, the White & Case attorney representing the group.
But Lauria said the group did not intend to agree to the proposal to exchange their debt for 29 cents on the dollar.
The Reuters article speculates that the outcome probably indicates that this is the same route that the government will take with GM, particularly if the Chrysler BK continues to move along as swiftly as it has so far.
I’ve read a lot of debate on the rights and wrongs of what the government has done in the Chrysler proceeding as it applies to the bankruptcy code. Most of the articles were either so lawyerly and layered with conflicting case law that by the time you reached the end, drawing a conclusion was impossible or were written with so much bias towards or against the government that they weren’t credible. That’s why Megan McCardle’s post today was so refreshing.
She quotes from an article by David Skeel who has written a book on the history of American bankruptcy law and then adds her own observations. When you really want to cut through the sophistry surrounding issues looking at the history of how something developed and the logic behind the development is generally a very good way of doing so. McCardle does so quite well.