Legal Commentary

Gov't Preparing For Chrysler Bankruptcy Filing

By Big Tent Democrat

NYTimes:

The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

Here's the interesting part:

The Treasury has an agreement in principle with the United Automobile Workers union . . . Moreover, Fiat of Italy would finalize its alliance with Chrysler while the company is under bankruptcy protection. The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt.

(Emphasis supplied.) More . . .

The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

That is pretty far apart. Apparently, the lenders think they will do better in bankruptcy.

Here's my question, is the government prepared to be tough on the financial industry bondholders? If not, why not?

Speaking for me only

Full post as published by TalkLeft on April 23, 2009 (boomark / email).