Chrysler: Let The Games Begin
As the continuing Chrysler story continues to unfold thefocus now shifts to Manhattan and the courtroom of Judge Gonzalez. The preliminary hearings began this morning and already the stage is being set for the upcoming fight between the company and the minority group of creditors whose rejection of the government’s last offer precipitated the bankruptcy filing. These are early days, but here’s a couple of things to bear in mind:
- Yes the administration keeps saying that they think this will be a ‘surgical’ bankruptcy and that it will all be over quickly. But in the court documents Chrysler asks for as much as four months to deliver a detailed plan of reorganization. That puts the date of its reemergence well into the late summer. Not quite the speed that the government had in mind.
- The position of the minority creditors is weaker than all their public protestations would indicate. Remember that the larger creditors and the UAW had already reached an agreement – the same one that the minority rejected. The court is most likely going to wonder why the minority cannot agree to the same terms as the majority. Certainly there will have to be a much stronger argument from the smaller banks and hedge funds that comprise the minority than the one they have pressed so far: that the big banks caved because they are receiving TARP money which makes them vulnerable to government strong arm tactics.
Well at least we are underway. Expect quite a fight initially. The judge has plenty of experience: he oversaw the Enron and WorldCom filings. Let’s hope he moves things along quickly.
Meanwhile, with the auto industry now in active reorganization and those bank stress test being released next week we know one thing for sure: New York bankruptcy attorneys are having a field day.
What’s new about that?
