Toxicroach clocks in with today’s ChryCo court action. And here’s one from left field: Chrysler FInancial attempts to short-circuit the plan—put forward by the President of the United States no less—to transfer all of the zombie automaker’s business to GMAC. Turns out they would do anything for love, but they won’t do that.
“Chrysler Financial got into the act today, objecting to GMAC providing financing going forward (download pdf here). First, they complained about the celerity of the proceedings. Then they pointed out that Chrysler Financial has liens on, oh, all of the Chrysler product on dealer lots, and that the agreement with the dealers prohibits them from financing through anyone else. Since the dealers are not debtors in bankruptcy, the court can’t really protect them. Chrysler Financial’s remedy: kick GMAC to the the curb, replace them with Chrysler Financial. Failing that, let ChryFi see the terms of the agreement between GMAC and Chrysler proper (which had previously been sealed by the court to protect competitive information). The Non-TARP bondholders also filed a motion to protect their identities because Obama is defaming their reputation! The judge shot that down fast. Looks like we will get to find out who all the non-TARP bondholders are by tomorrow at 10 a.m. (download opinion here).
Bridgestone Tire filed an objection to sale on the grounds that if the deal goes down as stated, NewCo would be able to demand tires from Bridgestone for 90 days, and then stiff them without any liability by rejecting the contract. This is a technical objection and really shouldn’t be too much of a hurdle (download pdf here).
The non-TARP bondholders filed a supplemental objection to the bidding procedures, arguing that they are essentially designed to make sure that nobody except NewCo can successfully bid on anything at all (download pdf here). For instance, any non-NewCo bidder would have to put 10% down on any proposed purchase price, they have to accept the UAW agreement, and that all bids be for the whole thing or not at all (no sniping Jeep, for instance).
That’s the action as of 7p.m. today. My gut is that the Chrysler Financial thing might be a big deal. They pretty much have to win this or die, and they have lots and lots of security against parties that are not subject to the automatic stay. Has a company ever stabbed its ex-in house bank in the back before, while the bank held liens on all of their product? Did the government spurn Chrysler Financial?
I’d also like to point out that if not for Uzzi and the non-TARPies, Chrysler’s Sunday night ambush may well have worked. The other objections to the motion didn’t hit the court until Tuesday. If not for Uzzi throwing a monkey wrench in the works, the order may well have been entered already setting the course for the sale. The sale procedure in the original motion would require objections to be filed by the 15th for most creditors, and the final hearing on the 21st.
Keep in mind that under the local rules, the Monday hearing would have had to happen on May 25th, much less the final hearing. Whether you think it’s a good thing or not, Uzzi and the non-TARPies appear to have sapped enough momentum to give the other creditors a chance to get their bearings and get their lawyers slowing things down too.”
Can anyone elaborate on the relationship between Chrysler Financial and Chrysler?
I thought that they were on the same side and having Chrysler Financial shutdown and replaced by GMAC was a done deal.
Thanks.
Government bailouts colliding in Chrysler bankruptcy:
http://www.huffingtonpost.com/2009/05/05/creditors-may-have-pushed_n_196964.html
Escort: the law of unintended consequences sure is a bitch, isn’t it?
Also, do we need credit default swaps? I thought bond insurance was fairly standard (if expensive for the D3).
Yet to be heard from and likely to be pissed off and combative: The Dealers.
Stay tuned. Is Judge Gonzalez a man or a tool?
Finco’s liens are correct in many cases, but if CFC takes them out, then that’s that. The Cap loans and facility loans are a different story, I see their arguement more on that point than on the floorplan. I would assume that if your store has borrowed CFC $ on op cap, facility, and cars…then GMAC is going to have to take out all three pieces to get unencumbered collarteral.
ChryFi aka CFC aka Cerebrus. This last brigade from CFC is the two headed dog barking again. If they don’t pull this off, then CFC’s next product launch could be A) 0 money down and 48 month loans for breast augmentation B) financiing on both high school and collegiate class rings or C) leasing body shop equipment to repair shops with not so muy bueno credit.
They have a point regarding thier liens. Hopfully the judge will quickly reconize the dog’s intentions are far from the good of the united states. They’ll get cramdowned on this one. The dog has bit and barked too much, everyone at the factory is sick of CFC. The CFC gang needs to start a training camp for prison guards if they are crammed out of the auto biz.
Another objector….
http://detnews.com/article/20090505/AUTO01/905050422/Michigan-agency-objects-to-Chrysler-sale
Isn’t Chrysler Financial owned by Cerberus? If so, I hope they get the royal treatment … not the good kind.
Is ANYBODY rooting for the government right now?
toxicroach :
Also, do we need credit default swaps? I thought bond insurance was fairly standard (if expensive for the D3).
Well that’s just it. CDS were invented to get around insurance regulations which would have never allowed a company issuing insurance to get leveraged 20-30 to one. It was all a huge scam brought to you by people who believe in deregulation, trickle down, supply side economics.
Forget Chrysler for a moment, and look at GM’s SEC proposed “restructuring” filing (late yesterday).
The highlights:
* Increase the number of authorized shares to 62 billion (!)
* Reduce the par value to one cent.
* Effect a 100:1 reverse split for the existing shareholders.
Talk about a cramdown…..GM stock should tank today.
Who is the primary owner of Chrysler Financial? Cerberus.
Who is the primary owner of GMAC? Cerberus.
Who is the primary owner of Chrysler MoCo? Cerberus.
Who in going to pay for Cerberus’ epic failure? Here’s a clue; It begins with a T, has an XP in the middle and ends in R.
I think I am going to be sick.
Chrysler Financial has been the “loyal wife” behind the scenes for years, keeping the car company ALIVE. If it wasnt for CFC, Chrysler Motors would have been out of business years ago. It is those loans that CFC made over the past 3 years that allowed Motors to build and sell cars and ultimately was the downfall of CFC. These loans were toxic and non performing. CFC fell on the sword so Motors could survive. Now CFC needs some help from big brother and what happens. Like a successful dirt bag husband who left his loyal wife for a new “younger model”, CFC is dropped like a hot potato for the next hot deal. GMAC????
3500 hundred CFC employees just dumped on the street by the latest deal. Now it looks like CFC is just fighting for what they can salvage.(and yes, maybe the scorned wife is a little mad)
The most disturbing part of handing financing to GMAC is that GMAC out sources a lot of their customer service, collections, etc. to foreign countries. How are we preserving more jobs by shutting down Chrysler Financials 3500 US jobs and sending a portion of those jobs outside US borders?
Another side to the story is that Cerberus doesn’t own much more than 10% of GMAC. But if the majority shareholder in GMAC wants to kill Chrysler off by not acting in Chrysler’s best interest, then this entire exercise of bailing out Chrysler, the mandatory merger with Fiat, etc. will be an exercise in futility.