Chrysler: Bankruptcy Plan Approved, Over by Month's End?
GMI hears Chrysler's bankruptcy is looking up, might be over by the end of the month.
May 6, 2009
On April 30th, President Obama and his Auto Task Force (ATF) announced that thanks to four of Chrysler LLC's smaller secured bondholders, the company was going to be placed into Chapter 11 bankruptcy protection. The select few of creditors were the only stakeholders involved in the company that refused the plan set forth by Chrysler, Fiat and the United States government. During the bankruptcy announcement President Obama stated that this was going to be a "quick and surgical" bankruptcy process. Some speculated that it would not be quick at all, but it sounds like Obama kept his word. GMI is hearing that Chrysler's bankruptcy plan has been approved by the judge.
The select few (we've heard four) bondholders that were bucking at the plan are apparently hedge fund managers. Last week they announced, with a legal team intact, that they were going to challenge the Chrysler LLC bankruptcy plan. Their argument was that because all of the major creditors of Chrysler (JP Morgan, Citigroup, et al.) received TARP money from the US Government, they should be excluded from the approval process. GMI was told early this morning that the judge has thrown out their argument, ruling in favor of Chrysler and the US government. The bondholders putting the argument forward reportedly held less than 10% of Chrysler LLC debt.
With the "363" plan reportedly approved, the next step for Chrysler is the asset sale, which is part of the pre-packaged bankruptcy planed by the ATF. It is expected that the US government will make a bid for nearly all of Chrysler LLC's assets (close to $3 Billion we're told), which will form the new company that will emerge from bankruptcy. The name of the new company, as GMI reported last week, is supposedly Chrysler Acquisition Corporation.
Sources have also indicated that Chrysler could be out of bankruptcy protection by the end of this month! Keep in mind that the timing of reemergence is not set in stone, so that could change. At this time, however, it looks like Chrysler's bankruptcy is indeed "quick and surgical."