Chrysler holdout creditors give up court challenge

[Bozita]

Source: Detroit News

Friday, May 8, 2009
Chrysler holdout creditors give up court challenge
Gordon Trowbridge and David Shepardson / Detroit News Washington Bureau


Washington --In a major boost for Chrysler's chances of emerging from bankruptcy in the coming weeks, dissident creditors said Friday they would give up their court fight against the automaker's bankruptcy reorganization plan.

"After a great deal of soul-searching and quite frankly agony, Chrysler's non-TARP lenders concluded they just don't have the critical mass to withstand the enormous pressure and machinery of the U.S. government," Thomas Lauria, a lawyer for the holdout lenders, said in a written statement.

Lauria's statement said the lenders would drop their fight in U.S. Bankruptcy Court against Chrysler's plan, but they did not agree to a U.S. Treasury proposal, OK'd by most of the company's secured lenders, that would give them roughly 29 cents for every dollar of debt they hold.

The move came after two of the largest holdout creditors, OppenheimerFunds and Stairway Capital Management, withdrew their objections Friday. It is likely to make it even easier for the company to win approval of a bankruptcy plan constructed by Chrysler, alliance partner Fiat SpA and the Obama administration. And it's a victory for Obama and Michigan elected officials who had lashed out at the holdout lenders, calling them "vultures" and "speculators" who put their financial interests ahead of thousands of workers.

Read more: http://www.detnews.com/article/20090508/AUTO01/905080433/Chrysler-holdout-creditors-give-up-court-challenge

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Article was posted at 1:08pm EDT.

[AndyA]

1. Doesn't this have to do with the creditors being paid by AIG instead of Chrysler?

I read something about how they'd leveraged themselves so that AIG would end up paying them dollar for dollar, via the U.S. taxpayers, through credit default swaps or something like that. :shrug:

[Joanne98]

5. YES! They bought credit default swaps that paid 100% if the company failed.

They got PAID so they don't care now except for the INVESTIGATION THAT'S COMING THAT MAY PUT THEIR GREEDY ASSES BEHIND BARS FOR THE REST OF THEIR LIVES WHERE THEY BELONG!

[Igel]

11. How "may" inevitably becomes "must" ...

all we have to do is say, "I want it to be so, so it is" and tap our heels together. Of course, rather than returning to Kansas, we wind up in Oz.

The original report was a suspicion from a Congressperson requesting an investigation, if the investigating agency thought it was worth it.

That's the total level of proof. Vicarious suspicion. How low our standards fall when our belief system requires it.

Then again, that's the way it works, isn't it?

Yes, there's a giant blogosphere citing people citing people citing people who cite people, and everybody's an expert. But often when you finally track down the chain of citations, often enough you come up with mental lint. It happens sometimes in academia (PM me for a fun example from linguistics). It happens fairly often in the peer-championed blogosphere.

[Lucky Luciano]

9. They had no idea that AIG was effectively their counterparty.

The people who trade CDS might trade with a big bank like JPM, Goldman, UBS, etc and AIG may also trade with said banks and the banks simply match the two market participants. Both market participants consider the banks (Goldman, UBS, etc) to be their counterparty - and the CDS buyer has no idea that AIG was the seller providing the liquidity - they only know that the bank was the middleman. Furthermore, even if they knew AIG was the seller of CDS....well, then it must have been a while ago and long before the rescue of AIG because AIG was no longer in the business of selling CDS after the rescue....hence there was no knowledge of government paying for the contracts that AIG sold them since the rescue had not yet happened!

Also....the contracts do not pay 100% of the face value of the bonds - they pay 100% in exchange for either the bonds or an agreed upon recovery value settled through an auction process. If the recovery is 29 cents on the dollar and the CDS holder settles with a cash payment on $10MM CDS, then they net out $7.1MM. They can also, if they hold bonds, exchange the defaulted bonds for $10MM. Also, if they hold CDS and bonds there is little reason to fight this in court because if there is greater recovery in the bonds, then there is less value in the CDS contract - they offset (assuming the hold equal notional amounts of bonds and CDS)! The gamble could be that they try to take a cash settlement as described above with the auction process and hold the bonds and try to fight for a bigger recovery, but that is very risky. Who needs that risk at this point?

All that said, since some may have insured their bonds with CDS, it has relieved them of their pressure to fight this in court and let Chrysler get on with things and reemerge from BK.

[STOP_BS]

2. why WE MUST PUT MORE MONEY TO THIS DEAL?

Why we must use more of our tax cash to this deal if the Unions is getting 55% of the company?

[STOP_BS]

4. TIRED OF BAILOUTS

Tired of bailouts and abuse of our money, future , huge deficit and insecure prosperity of this country.

[Joanne98]

7. WHAAAAAAAAAAAAAAAA!

[Joanne98]

6. Because union members WORK FOR A LIVING not like lazy right-wingers

They pay taxes too!

[Earth Bound Misfit]

8. I are am you with, bruthur...

Seriesly!! Whut a buhnsch uf morans...

[bluestateguy]

3. Obama's team went Chicago on their asses

Bullying? Intimidation? Perhaps. But the Chrysler comapany, and jobs will be saved as a result. And that is just a little more important to me than a bunch of hedge funds' hurt feelings.

[xchrom]

10. recommend

[Pirate Smile]

12. Group ends fight against Chrysler restructuring

Source: Associated Press

NEW YORK - The group of dissident Chrysler bond holders challenging Chrysler LLC’s government-backed restructuring plans said Friday it is dropping its court fight.

The dissolution of the group — at least on an official basis — clears away the largest obstacle standing in the way of Chrysler’s plans to sell the bulk of its assets to Italy’s Fiat Group SpA and could pave the way for the quick exit from bankruptcy protection that the automaker and the federal government desire.

Geoffrey Gwin, principal of the Group G Capital Partners LLC hedge funds, said that after weighing the obstacles ahead and along with the opposition they had faced before, the group’s five remaining members realized that they couldn’t mount an effective legal challenge.

But that doesn’t mean that the deal reached before Chrysler’s Chapter 11 filing — which would exchange the automaker’s total of $6.9 billion in secured debt for $2 billion — has the group’s support.
“We’re still opposing this and not signing the consents, but the active fight has been more challenging,” Gwin said.



Read more: http://www.msnbc.msn.com/id/30643410/

[Triana]

13. prop up Wall St. and close down what little manufacturing is left on Main St.

Gee. I'm sure glad we have such a smart gov't.

:sarcasm:

[TokenRightGuy]

14. Linearity Check

Hey there DU,

All the lefties that used to populate the same boards I do have bailed since the election, so sorry to have to kind of infiltrate here. But, I'm terribly curious to know if you guys are applying the same standard to Obama as you did to Bush. From this article Chrysler lenders give in on restructuring, I get this excerpt:

The hold-out lenders charged that Mr. Obama, who had called them "speculators" and questioned their patriotism as well as blamed them for the bankruptcy, used undue political pressure, even though they were pursuing their legal rights in bankruptcy court, where the claims of such secured lenders normally prevail.

Now, when Bush was accused of questioning patriotism, it was regarded as, well, bad. I'm wondering if you guys are condemning Barack for doing the same?

Also, are you guys slamming Barack for dramatically increasing the power of the government like you were with Bush? Seriously, I'm curious here. Flame on...