Tuesday, May 05, 2009


...for the cost of capital going forward are many.  Uncertainty in priority or the secured/unsecured status of bondholders is troubling.  With pricing of any risk instrument already being difficult, expediency of the process should not be given absolute priority.  Last but not least, all of this during a time when the Government wants to "encourage" lending.

May 5 (Bloomberg) -- Chrysler LLC dissident lenders must reveal their
identities by 10:00 a.m. tomorrow, a bankruptcy judge ruled, rejecting
claims that their safety was at risk.

Those named publicly include OppenheimerFunds Inc., Perella Weinberg
Capital Management LP’s Xerion hedge fund and Stairway Capital
Advisors. Perella withdrew its sale objection last week.

The lenders claim in their court filings that the U.S. government is
subverting federal bankruptcy law by forcing lenders to agree to a
reorganization that repays unsecured creditors ahead of some secured

The group, calling itself Chrysler’s non-TARP lenders, in reference to
aid other creditors got from the federal Troubled Assets Relief
Program, said the proposed auction would prevent a so-called “credit
bid” from its members.

Credit Bid

Under a credit bid, parties use debt to buy a company. The group also
seeks to block the proposed sale to an alliance led by Fiat, as well
as a request by the U.S. automaker for approval of a $4.5 billion
Treasury loan to finance the reorganization.

In a footnote, they cited a requirement that any competing bid include
10 percent of the purchase price in cash. That “appears designed
specifically,” to prevent non-TARP members from making a credit bid,
using the full amount of their secured claim, they said.

The group also objected to rules that would require all competing bids
be subject to the same terms as the proposed transaction with the
government and Fiat, which are financing the reorganization and
providing small-car technology, respectively.

Because bids need to be made in a week under the proposed timeline,
there isn’t enough time for parties to make due diligence required for
a competing bid, the holdouts said.

Secured Lenders

The group has pitted itself against secured lenders that agreed to the
Fiat deal, including JPMorgan, Citigroup Inc., Morgan Stanley and
Goldman Sachs Group Inc., saying those institutions had conflicts of
interest because they had accepted TARP funds, which included some
government controls.

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