The same creditors who President Obama
scolded last week for preventing Chrysler
from restructuring outside of bankruptcy have filed objections in bankruptcy court against the automaker's plan to reemerge as a new company owned in part by Fiat
. Chrysler has about $6.9 billion in debt that it owes to banks and hedge funds, and those entities who hold the I.O.U. for $4 billion of that debt have already agreed to accept $2 billion and walk away happy with the knowledge that it's better than nothing. Other senior creditors led by Oppenheimer Funds and Stairway Capital are not willing to walk away from the $3 billion they're owed without a fight. These creditors are specifically trying to block or delay the court proceedings scheduled for May 21st that would allow Chrysler to sell off its assets to a newly formed company of which Fiat would own a 20% stake that will grow to 35% after certain conditions are met. The Detroit News is also reporting that some of the dissenting lenders have received death threats that are being investigated by local police and the FBI.
This all comes down to the question of what these lenders would receive if Chrysler entered Chapter 7 and was liquidated versus what it's guaranteed to receive in a Chapter 11 settlement. Chrysler and the government claim they'll get more by settling, while the creditors claim otherwise. Considering that Chrysler's reemergence from Chapter 11 bankruptcy has the full support of the U.S. government, we're placing our bet on the proposed alliance and sale of assets to an entity owned partly by Fiat going through.
[Source: The Detroit News
| Photo by Scott Olson/Getty]