Chrysler Chapter 11 Is Imminent

[WriteDown]

Source: Fox News

Talks between the Treasury Department and lenders aimed at keeping Chrysler LLC out of bankruptcy broke down late Wednesday, making it all but certain that the car maker will file for Chapter 11 protection Thursday, according to people familiar with the discussions.

Administration officials, who have been braced for a Chrysler bankruptcy filing for weeks, say all the pieces are in place to get the country's third-largest employer through the court quickly, perhaps in a matter of weeks.

The talks with Chrysler's lenders broke down after the Obama administration's automotive task force worked into the evening to persuade several hedge funds and other lenders to accept a deal to reduce Chrysler's debt, said people involved in the talks.

The Treasury boosted its most recent offer to lenders on Wednesday by $250 million to $2.25 billion in cash for the banks and hedge funds to forgive $6.9 billion in Chrysler debt, people familiar with the matter said.....

Read more: http://online.wsj.com/article/SB124102375931669205.html

---

Guess its official :(.

[dipsydoodle]

1. Would that include Jeep ?

Or was that split off ?

[AndyA]

2. Jeep is still a part of Chrysler Corporation.

:(

[dipsydoodle]

6. Jeep is an icon

I'm guessing that in the event they do file that might be sold off intact.

[AndyA]

3. Those hedge funds helped to create this mess.

Time to make changes in how they can operate.

[WriteDown]

4. Wouldn't help...

Its not necessarily they're fault. They're owed a lot of money. We're talking abuot pensions, retirement funds, etc. If you had a retirement for 1M would you accept 10K for it when you could get 100K?

[blue_onyx]

9. It's their fault for pushing Chrysler into bankruptcy

Many of the debtholders were willing to negotiate with Chrysler. Those who weren't, as MI Gov. Granholm said, were being "greedy." Granholm named several of these difficult hedge funds:

Perella Weinberg Partners
Stairway Capital
Oppenheimer Funds

Granholm said:

“I m strongly urging those who are hedge fund managers to ensure that Chrysler is not forced into bankruptcy because they are holding out,” she said. “The hedge funds, those are the ones that have been previously charged with having made a lot of money by flipping paper, they are holding out as we speak–right now. The future of Chrysler is in the hands of some of these hedge funds who want to hold out for a greater profit. So on behalf of Michigan and on behalf of the thousands of people who will be effected if this company were forced into bankruptcy, I am publicly asking these hedge funds to not be greedy.”


I hope the companies who refused to negotiate with Chrysler end up getting screwed now that Chrysler with enter bankruptcy.

[WriteDown]

10. So if your retirement was with Oppenheimer

and you had 500K in Chrysler bonds, then you'd be willing to take 5K instead of 50K right? You wouldn't want to be greedy.

[blue_onyx]

11. You're seriously going to defend hedge funds

I can't believe the "progressives" on DU sometimes. They defend banks, hedge fund managers, and the rest of Wall Street but give the middle finger to the auto industry who employs average Americans.

Those numbers you are suggesting are numbers pulled out of nowhere. President Obama asked ALL parties to come to the table and these companies are not. They are, indeed, greedy.

[WriteDown]

12. To deny that these funds are used for retirements and

pensions is just denying reality. Also, you don't have to be a hedge fund to buy a corporate bond. I don't own any Chysler (luckily), but its not difficult.

[blue_onyx]

14. They'll lose more by not negotiating

These debtholders won't get everything they're owed once Chrysler is in bankruptcy. Rather than joining the majority of other debtholders to find a way for Chrysler to avoid bankruptcy while paying back some of the debt owed, these hedge funds decided to be selfish. I hope this selfishness backfires and their ENTIRE debt is wiped clean while the companies who did give some concessions get something out of this bankruptcy.

[WriteDown]

16. Actually, they won't...

They'll get a higher percentage of the debt. So instead of getting 5% they'll get 15% after liquidation. That's the whole reason why the deal wasn't accepted. Makes me wonder what you would do if it was your retirement. I'm sure you'd be willing to delay retirement by 15 years or so if you were in those shoes.

[blue_onyx]

19. "after liquidation"

Umm....you know it's Chapter 11, right?

Where they hell are you getting these numbers? Links please.


"Makes me wonder what you would do if it was your retirement."

Makes me wonder what you would do if it your state/region being destroyed economically because of these hedge funds pushing one of your major employers into bankruptcy.

[Barack_America]

25. The hedge funds are going to fight the Chapter 11 filling.

It was in the article.

[WriteDown]

27. I'm no fan of hedge funds....

But its amazing that the real culprits escape any blame. Where was the American consumer supporting union workers? How about the mismanagement by Daimler? The hedge-fund blame is just a smoke screen.

[SOS]

77. Chrysler investor disagrees

From the May 1 NYT:

"There's zero chance this group will be able to get anything more in bankruptcy court given that 90 percent of the lenders are lined up against them" said a hedge fund manager
who owns about $10 million of Chrysler's secured debt.

[high density]

18. Well if the options are $50k instead of $0k, I'd take $50k. NM

[Barack_America]

26. That's not the hit that Oppenheimer is being asked to take...

They've been offered no less than $.25 on the dollar.

The problem is that they have credit default swaps betting that Chrysler will fail, so they're trying to make this happen so they can turn a profit on the backs of working Americans.

Personally, if my retirement was with Oppenheimer, I'd get it the fuck out of there considering their obvious lack of respect for working Americans.

[WriteDown]

32. Link please. nt.

[Barack_America]

36. .

http://online.wsj.com/article/SB124109550079373043.html

I think you might recognize the source.

[WriteDown]

43. Zero mention of credit default swaps....

Regardless, it is the job of hedge funds, retirement funds, IRA's, 401K's etc to protect their investors from loss. Can't blame them for trying to accomplish that. Like I've said, this is all a smokescreen. If you want to blame someone, blame the American consumer for having no pride in union made vehicles, or blame Daimler for terrible management.

[Psephos]

50. You may not realize who's really going to take a beating on this

http://www.ft.com/cms/s/0/bb1d8d00-359d-11de-a997-00144feabdc0.html?nclick_check=1

This isn't as simple as assumptions lead many to believe.

Meanwhile, going forward, who will lend money to Chrysler...or for that matter, any other industry where contractually secured liens used for collateral can be waved away by a politician? Would you?

[Lucky Luciano]

5. Looking pretty official now according to my Bloomberg terminal. nt

[dipsydoodle]

7. Now official

Chrysler is to enter bankruptcy protection after failing to persuade its main lenders to write off its debts, a White House official has said.

President Barack Obama is now due to make a statement later on the future of the struggling US carmaker.

The news comes as Chrysler had been in last minute talks to restructure the business before a midnight deadline.

President Obama has already said that Chrysler would emerge stronger after any move into bankruptcy protection.

http://news.bbc.co.uk/1/hi/business/8027109.stm

[xchrom]

8. recommend -- very sad. nt

[Barack_America]

13. Oppenheimer Funds, Stairway Cap Management and Perella Weinberg Partners' Xerion Fund...

That's who to blame.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5566847&mesg_id=5566847

[blue_onyx]

15. Yep

I hope these companies get NOTHING once Chrysler is in bankruptcy while the other reasonable companies who gave concessions are rewarded by having at least some of their debt paid off.

[Barack_America]

20. Ah, but these companies placed bets that Chrysler would fail...

So they stand to gain quite a bit by forcing it to do just that.

Credit default swaps should be illegal.

[WriteDown]

35. Why not just make it illegal to short any stock as well?

You should always be required to think that stocks will rise. :eyes:

[Barack_America]

37. So you think that allowing credit default swaps has worked out well for this country?

O-kay then.

:eyes:

[WriteDown]

45. Shorting something is nothing new...

While we're at it, lets ban the Do Not Pass line on the craps table. I hate when people bet that. Throws off my roll.

[jmowreader]

76. NAKED CDS are the scourge of the economy

Covered CDS, OTOH, are a necessary part of structured finance. Be honest: would YOU buy a MBS that was backed by a tranche comprised of Option ARM re-fis, or a credit card receivable ABS that was backed by tranched store credit card balances? Fuck no you wouldn't, and neither would anyone else.

Naked CDS are nothing more nor less than gambling debts; the faster they are banned (and the outstanding ones voided), the better off we will be. If you can't produce the security the CDS is covering, you need to lose your bet.

[ConcernedCanuk]

17. Correct me if I'm wrong, Ch 11 is "restructuring" - Ch 7 is REAL bankruptcy - ie "liquidation" ?

.
.
.

My understanding is that a Chapter 11 is designed to save the Company

and a Chapter 7 just liquidates the company and the creditors take whatever they can get for pennies on their dollars.

So once again, Chrysler will survive it's financial follies.

Maybe it shouldn't?

. . . :freak: . . .

[Barack_America]

21. The hedge funds are going to try to force liquidation.

In order to increase their profits from the company.

Great people, eh?

[blue_onyx]

23. Obama allows this to happen

and the Democrats won't win Michigan's electoral votes for many years to come.

[Barack_America]

24. How exactly? By not prohibiting credit default swaps when Bush was in office?

How many billions of taxpayer dollars do these hedge funds deserve in order to reward their greed?

[blue_onyx]

28. Obama is in office now

The problems may have been caused by Bush but how they're dealt with is all on Obama. The way the auto companies have been dealt with compared to Wall Street is a big issue around here. Now, if the administration sits by and allows Chrysler to be forced into liquidation by hedge funds, people in metro Detroit (where half the state's population is at) won't be happy.

[Barack_America]

30. What legal recourse does Obama have to make them accept the deal?

What's the point of getting angry at him for not doing something he isn't able to do in the first place.

Do you want your tax money going to these hedge funds who are looking to make a profit off of the auto industry's demise?

[blue_onyx]

31. Obama is forcing Chrysler and GM into bankruptcy

so I have to think there's something he can do to protect Chrysler from liquidation.

[Barack_America]

33. Not true. Obama isn't giving them the money to avoid bankruptcy....

Because he doesn't want American tax payer money profiting greedy hedge funds.

Chrysler is going into bankruptcy because they don't have enough cash on hand to guarantee their debt.

[Romulox]

34. Nonsense. The Obama admin has given BILLIONS to these same hedgefunds already.

AIG's "counterparties" (primarily foreign banks) were paid off at 100%.

[Barack_America]

38. Because of the credit default swaps these hedge funds may walk away with more than 100%

Should the American taxpayer fund that?

[Romulox]

41. They didn't hesitate to pay off the CDS's when Wall Street and its bonuses were on the line.

[blue_onyx]

39. "they don't have enough cash on hand to guarantee their debt."

Just like AIG, CitiBank, etc. But for some reason, GM and Chrysler get forced into bankruptcy while Wall Street gets more and more money thrown at them.

[Dinger]

48. Our President Is Popular, But Nobody's So Popular That They Can Write Off Any State (nt)

[whopis01]

29. Yeah - "restructuring" as in "breaking the unions" n/t

[Dinger]

49. Exactly (nt)

[amandabeech]

51. And as dumping asbestos and environmental liability, and dumping dealerships.l

Bankruptcy is a way to get rid of all kinds of stuff that a company (or its boss) wants to get rid of.

I'm a Michigan ex-pat, and I doubt that Michigan now has the $$$ to clean up the asbestos and whatever environmental problems that Chrysler has left in the state. Ohio and Indiana probably aren't in much better shape.

[mule_train]

22. Sad day for Ioccoca

he's probably wondering 'why did I bother'

I never understood the Mercedes/Chryseler merger

never been 2 more mismatched companies

[Romulox]

40. If Obama is breaking the UAW, this means he is writing off Michigan, possibly Ohio. nt

[Barack_America]

42. He's trying to break the hedge funds. Are you even listening to him?

He's explaining this now.

"I stand with the UAW, Chrysler and their suppliers, I do not stand with the hedge funds..."

To paraphrase.

[Romulox]

44. That's not how bankruptcy works. Look up "the equality principle"

[Dinger]

47. Dare I Say It?

He wrote them off in the primaries.

[amandabeech]

52. Northern Indiana, too. Aren't there a lot of plants in Missouri? n/t

[Dinger]

46. My 78 Year Old Father Is Retired From Chrysler. What Does This Mean For Him?

And others in his situation?

[Tab]

53. Chrysler to File for Bankruptcy (today)

Source: Washington Post

Chrysler, one of the three pillars of the American auto industry, will file for bankruptcy today after last-minute negotiations between the government and the automaker's creditors broke down last night, an Obama administration official said.

U.S. officials had offered Chrysler's secured lenders $2.25 billion in cash if they would agree to writedown the $6.9 billion in secured debt that the company owed. But a small group of hedge funds refused the 11th-hour deal, forcing an imminent bankruptcy.

An administration official this morning expressed disappointment, saying the holdouts had failed to "do the right thing," but that "their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders, nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward."
...
As talks broke down late last night, it became near certainty that the Obama administration would send Chrysler into bankruptcy under a plan that would replace chief executive Robert L. Nardelli and pump billions of dollars more into the effort, all in hopes that the company could emerge from court proceedings as a re-energized competitor in the global economy.
...
During the bankruptcy, the governments would provide about $4 billion in new funds, with 80 percent coming from the United States and 20 percent from Canada, which hosts a number of Chrysler operations. As the company emerged from its reorganization, the United States would provide roughly another $5 billion, with more coming from Canada, the sources said. The sources warned, however, that the figures were fluid.

Particularly striking to some economists and historians is that the plan turns over ownership of a major U.S. industrial company to an employee-run trust, a deal that is "unprecedented on this scale," according to Harley Shaiken, a University of California at Berkeley professor and expert on unions.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/04/30/AR2009043001639.html

[Thrill]

54. Greedy Bond Holders. What do they get now if Chrysler goes bankrupt?

[blue_onyx]

60. Our governor called out three particular hold outs yesterday:

Perella Weinberg Partners
Stairway Capital
Oppenheimer Funds

She said:

“I m strongly urging those who are hedge fund managers to ensure that Chrysler is not forced into bankruptcy because they are holding out,” she said. “The hedge funds, those are the ones that have been previously charged with having made a lot of money by flipping paper, they are holding out as we speak–right now. The future of Chrysler is in the hands of some of these hedge funds who want to hold out for a greater profit. So on behalf of Michigan and on behalf of the thousands of people who will be effected if this company were forced into bankruptcy, I am publicly asking these hedge funds to not be greedy.”

http://michiganmessenger.com/17997/granholm-to-hedge-fund-companies-stop-being-greedy


I'm pretty sure they won't listen to Gov. Granholm's pleas.

[Telly Savalas]

69. It's quite possible they are counterparites in credit default swaps on the bonds.

If Chrysler defaults on the bonds, the CDSs pay the bondholders.

Moreover, it's very possible that a lot of these CDSs were written by AIG, in which case taxpayer dollars are funneled through AIG into the hands of hedge funds that hold Chrysler bonds.

Note that I haven't heard a report of this, but I'd be surprised if this wasn't happening to at least some degree.

[msongs]

55. no more tax payer money for wall street, banks, and scammer funds nt

[xchrom]

56. recommend -- very sad. nt

[earthside]

57. This is Great News.

:sarcasm:

Expect at least a 200 point rally in the Dow on this encouraging development.

It shows that we have clearly formed a bottom.

This means that emerging from Chapter 11, Chrysler will be lean and mean.

It means that all those union employees that were sucking the blood out of Chrysler will be gone -- more labor supply for the service sector will make fast food hamburgers cheaper for everyone. Same goes when GM declares bankruptcy.

Woo Hoo!

The Dow is up a hundred points already!

:sarcasm:

[Amonester]

59. They'll have robots repairing other robots when they break...

and vice-versa, to the point almost no human being will ever be needed in there anymore.

[high density]

61. What do you propose as an alternative? Subsidizing the hedge funds so they're happy?

The government gave them an option beyond being completely wiped out. They decided that's not enough, so now they can fight with all the other creditors under bankruptcy. Good luck to them with that.

Don't forget either that Chrysler is a Cerberus private equity gamble that went tits up.

[brooklynite]

58. UPDATE (NYT): Obama to Speak at Noon

As a bankruptcy filing by the American automaker Chrysler appeared all but certain, the White House announced Thursday morning that President Obama and members of the auto task force would address the fate of the company at noon.

Last-minute efforts by the Treasury Department to win over recalcitrant Chrysler debtholders failed Wednesday night, , according to people briefed on the talks. Barring a last-minute agreement, Chrysler was expected to seek Chapter 11 protection, most likely in New York, these people said.

http://www.nytimes.com/2009/05/01/business/01auto.html?ref=business

[tabatha]

62. Is this not a good thing?

Particularly striking to some economists and historians is that the plan turns over ownership of a major U.S. industrial company to an employee-run trust, a deal that is "unprecedented on this scale," according to Harley Shaiken, a University of California at Berkeley professor and expert on unions.

[hugo_from_TN]

63. I think Chrysler is dead

Most people will not buy a car from a company in bankruptcy. Their already weak sales are going to crater.

[xultar]

64. I don't believe that is true now a days. Airlines went bankrupt and people trusted their lives

to them.

They may still make it. It is sad though.

[hugo_from_TN]

65. But you knew the pilots weren't going to leave in the middle of the flight.

[tabatha]

66. Maintenance is just as important as the pilot.

Cutting costs on maintenance can prove fatal no matter how good the pilot.

[shaniqua6392]

68. I will still buy from Chrysler or GM if they go into bankruptcy.

We have no problem supporting our awesome Michigan UAW workers. We have two Chrysler products right now and are going to trade in one of them for a newer model sometime this month. They will not die. They will emerge even stronger than before. I have faith in our American car companies and the workers who build them. All Americans should have faith in our country and the workers who built this country. Sorry for the rant. I just love my American cars and my fellow American workers.

[liberal N proud]

67. What will the downstream impact be from this

How will the suppliers be impacted?

It can not be good for them at all.

[Amerigo Vespucci]

70. Chrysler to file for bankruptcy, get financing

Source: MSNBC

DETROIT - Chrysler will file for Chapter 11 bankruptcy protection in New York on Thursday and will be eligible for up to $8 billion in federal aid to rebuild the ailing automaker, according to senior administration officials.

The officials say bankruptcy is necessary after talks with some of Chrysler's holdout creditors over the company's $6.9 billion in debt fell apart last night.

The officials requested anonymity because the details have yet been released.

The nation's third-largest automaker has already received $4 billion in government loans.

Read more: http://www.msnbc.msn.com/id/30489906/

[jobycom]

71. Do they still sell Fiats in America?

Haven't seen one in ages.

[Crabby Appleton]

72. They now have actually filed for BK. nt

[eppur_se_muova]

73. Chrysler bankruptcy deal revealed

Source: BBC

US carmaker Chrysler will file for Chapter 11 bankruptcy protection immediately and has formed an alliance with Fiat, President Obama has said.

Chapter 11 protects firms from their creditors, allowing them to rearrange their finances while still trading.

Some Chrysler dealerships will close over time but no jobs will be lost in the short term, President Obama said.

The move came after talks had broken down with Chrysler's lenders late on Wednesday, the White House said.



Read more: http://news.bbc.co.uk/2/hi/business/8027109.stm

[wtbymark]

74. because of hedge funds - figures

"While Chrysler's main banks, holding 70% of the debt, accepted this proposal, it was rejected by hedge funds that hold a sizeable proportion of its remaining debt. Hedge funds are private investment funds that typically attract rich private investors."

These people deserve zero: wasn't your damn hedge fund recapitalised in January? (Probably)

[liberal N proud]

75. Greedy hedge fund managers are destroying the American way of life

They are insanely greedy