REPORT: 'Old' Chrysler defaulting on loan obligations
Before there was a Motors Liquidation Co, post-bankruptcy GM's hived-off shelter for useless assets, there was Old Carco LLC. That's the company Chrysler built to house its useless assets, and unsurprisingly, it doesn't have good news for unsecured creditors. Old Carco was left with liabilities of $20.5 billion, but has less than half of that to pay off everyone it owes.
The latest accounting says there is $2.345 billion to pay things off. With a shortfall that drastic, even the U.S. Treasury and the Canadian governments are waiting for their money, with a $3.34 billion loan and $29 million in interest going not being repaid. The Treasury sent Old Carco a notice of default last month, which strikes us as a waste of a stamp and paper.
And since Old Carco isn't allowed to borrow any more money, there is almost no chance that creditors will be made whole. At this point, as the company tries to unload leftover factories and property, it looks like the best anyone's going to get is pennies on the dollar -- or just fractions of that -- and that could be for the folks first in line. Old Carco is dead, long live Chrysler...
[Source: Detroit News | Image Source: Bill Pugliano/Getty]
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Reader Comments (Page 1 of 1)
why not the LS2LS7? 5:30PM (9/08/2009)
I thought this was kinda of the whole point of the old/new BS. Many of their assets declined in value once they were clearly going to end up on fire sale. Not that they were in great shape to begin with.
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Epsilon-Not 5:32PM (9/08/2009)
Wasn't it already bankrupt?
Considering that it's a failed company designed to have no worthwhile assets, this really isn't surprising... ("Oh my! The worthless assets are worth even LESS than we thought!")
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geo.stewart 5:46PM (9/08/2009)
old news but inspires:
"Does my government bend me over? Let me count the ways...."
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GPR 10:55PM (9/08/2009)
Are you suggesting that the government should have done more to avoid this bankruptcy, or that they should have done less? I'm guessing you think the government should have done less, but then you'd still have this 10 cents on the dollar liquidation of assets, there would just be more worthless assets.
Can win for trying.
summazooma 7:13AM (9/09/2009)
Thank you, GPR...
geo.stewart 9:15AM (9/09/2009)
if Chrysler had been allowed to fail, the entire company- good and bad assets- would have been liquidated and creditors would have gotten more back.
As it is, the government forced through a bankruptcy of their own design ignoring bankruptcy law and screwing over countless creditors.
then hoping that a ho hum Fiat can revive a ho hum Chrysler that we might get our money back.
you surmise correctly that I prefer a government that is less intrusive in the market. liberals will argue that otherwise all these people would be out of work. thats bull.
the market will support X number of cars built and sold. it takes y amount of manpower to build them. if chrysler isnt building them, then Ford or Nissan or someone will. those workers will get jobs with the other companies. otherwise government is artificially inflating the employment level and reducing the efficiency of a company and ultimately its ability to make money.
Polly Prissy Pants 5:51PM (9/08/2009)
So can I set up an "Old PPP corporation" and put my home loan, car loans and credit card bills in it? Man, that would be sweet. "Oh, sorry, I don't owe you all that money, that's now owed by Old PPP. Maybe you should talk to them about collecting what you're owed."
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StanleyVanBuren 6:07PM (9/08/2009)
Yeah, it's called bankruptcy.
why not the LS2LS7? 1:32AM (9/09/2009)
Kinda, maybe, if you're really broke. Bankruptcy is an exercise in "half a loaf is better than nothing at all". The creditors just have to accept they're not going to get all of what they are owed.
You can keep some assets, but a lot of them must be surrendered to the creditors. I have no expertise as to whether the amount of assets GM and Chrysler are allowed to keep is within reason for "normal" bankruptcies. Maybe someone with some expertise could say better.
Pokey 5:52PM (9/08/2009)
File this one under "no shiP Shirlock", in the cabinet marked "duh".
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MemphisNET 6:19PM (9/08/2009)
Last chance, Chrysler Group! You know I'm your biggest fan -- but this is it. Do not pass go, do not collect 200 dollars.
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Jared 8:30PM (9/08/2009)
They already passed go and collected their money.
Obviously DaMinority 7:28PM (9/08/2009)
I haven't verified word one of the article above, but if the company has 2.345B in cash and owes 20.5B, that's already 11.44 cents on the dollar, PLUS the *proceeds* from the land dump. That's better than the last two bankruptcies I worked on, neither of which were government induced (unless you consider that bankruptcy is a protection provided by statute, but now we're teaching civics instead of division.)
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why not the LS2LS7? 1:23AM (9/09/2009)
Seriously. You don't file chapter 7 when you're solvent, now do you! You're pretty much for sure going to leave at least some creditors holding the bag because if you had the money to pay them you wouldn't have filed for liquidation.
knightuc1992 7:37PM (9/08/2009)
Just put Chrysler out of its misery, liquidate the whole damn thing and get it over with....
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len simpson 9:46PM (9/08/2009)
no matter which bank, ins co, union, gamblers, CEO, board of directors stole the money, we lose.
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the4thheat 4:20AM (9/09/2009)
omg...a "REPORT" about a bankrupt company not having money to pay their loans-man who would have figured?!
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nanotube 1:42PM (9/09/2009)
I'll add this one to my list of superpowers I'd like to have: the ability to duplicate myself and offload all my debt to a "broke" me and all my assets to the "wealthy" copy. Corporations are so cool.
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axio.matik 4:20PM (9/09/2009)
You already have that power. It's called filing for bankruptcy. Good luck getting a loan afterwards, though.