Chrysler Will Declare Bankruptcy, Say Administration Officials

By Brendan Moore

04.30.2009

chrysler-logo-small4Obama Administration officials are telling reporters that Chrysler is going to file bankruptcy today.

President Obama has a press conference scheduled for 12 noon ET to address Chrysler’s travails.

Chrysler’s creditors and the US Treasury department officials just couldn’t come to an agreement to write down Chrysler’s debt. The holdouts (mostly hedge funds who deal in distressed debt) believe that they can get a return of approximately 65 cents on the dollar if Chrysler goes into bankruptcy liquidation. The federal government and the four major lenders who agree with the government offer have offered those holdout creditors a maximum of 33 cents on the dollar and a small equity position. The four major lenders that hold 70% of Chrysler’s debt are Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley – they decided some time ago that the government’s deal was the best they were going to get.

If Chrysler declares bankruptcy, there is little doubt that a tremendous battle over Chrysler’s assets will commence between the Treasury and Chrysler’s creditors.

Although the smart money might lean towards the government in this struggle, bankruptcy judges have a great deal of latitude in their decisions and probable outcomes sometimes get tossed out the window. There is no certainty to outcomes in complex bankruptcies like this one.

Twelve o’clock is only a half-hour away; we’ll get back to you this afternoon after some of the dust has settled.

COPYRIGHT Autosavant – All Rights Reserve

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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2 Comments

  1. And the Treasury is going to give Chrysler another eight billion to get it though bankruptcy.It’s clear they plan to strong-arm Chrysler creditors. The four banks agreed, but so what? Can you say TARP?

    Eight billion more of our tax dollars for a company owned by the government, the UAW, and the Italians! How many millions will Chrysler get, and who is it for!!!???

  2. Ten,fifteen billion to save thousans and thousands of American jobs or almost a TRILLION dollars for a war that has killd thousands and was pure folly?

    Hmmmmm.

    I think it’s a good decision. Although I wish Chrysler actually had a clue before this moment so we didn’t have to bail their asses out.

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