GM, Chrysler May Get Bankruptcy to Protect U.S. Loans

[Joanne98]

Feb. 9 (Bloomberg) -- General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.

U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.

If federal officials fail to get a consensual agreement to change their place in line for repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.

“They are negotiating to see if they can reach an agreement,” said Workman, a bankruptcy lawyer based in Washington. “If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us’” to be first in line for repayment.

http://www.bloomberg.com/apps/news?pid=20601087&sid=atjQ8fjgT.kY&refer=home

[Statistical]

1. "may get" isn't exactly what is happening.

More like US GOVT wasn't smart enough to realize they aren't senior debt.

Now US GOVT is trying to mafia style force a change in debt order using threat as annihilation in bankruptcy to get its way.

Wonder who will blink first: Senior debt holders or US Govt?