Chrysler Bankruptcy

Chrysler filed for bankruptcy today. For reference, as of now, this is the only docket information I can find (outside of Pacer logins)

Petitions can be found here: Southern District of New York Bankruptcy Court. Here is more information I just found: Chrysler Restructuring Website

As of right now, the Carco bank debt is trading at 25.25-27.25, with Finco (the auto financing arm) first lien trading at 77.25-79.25 and second lien trading at 52-55. Yesterday - at about this time, the Carco was trading at 23-27, with FinCo's first lien trading at 63-65 and the second lien trading at 34.5-37.5. As you can see, the FinCo lenders are loving this (up LOTS on both tranches). Maybe one of the reasons a number of funds did not play ball? Because their exposure to FinCo relative to CarCo?

And my takeaways (from a distressed investor:
  • Chrysler will use a 363 sale for its relaunch
  • Details of the Chrysler Fiat Alliance - maintain existing factor footprint, Fiat contributing technology and IP (but no capital???). And getting 20% of the stock with earn out rights of 15% more of the equity (5% tranches) for meeting performance metrics.
  • UAW accepting concessions but probably won't be enough
  • Lenders will receive $2B of cash on a $6.9B claim. That translates to 29 cent recovery. This will be forced on dissenting creditors (do they have the required votes?)
  • Daimler waiving its $2B of second lien debt, give up its equity, and settle PBGC claims for $600M
  • Cerberus waiting its $2B of second lien claim and forfeit its equity stake.
  • VEBA will be established financed with a $4.6B 13 year, 9% note and will receive 55% of the new equity of Chrysler.
  • U.S. Treasury receiving 8% of the new equity. Can select 4 independent directors. Canada/Ontario to receive 2% of the new equity.
  • U.S will provide a $3.3B DIP as well as provide $4.7B in exit financing to New Chrysler (First Lien Term Loan with varying maturity schedules), and a $288M note which is a fee for making these loans.
  • Canada/Ontario participating on a formula/basis
  • Chrysler will use GMAC for financing. SO THAT IS HOW CERBERUS IS GETTING SOME LOVING IN THIS DEAL (CERBERUS OWNS ~50% of GMAC). Gmac Bond's have rallied today.
  • More lambasting of smart hedge funds.
  • Employees getting paid, suppliers getting paid, customer warranties getting paid. U.S. taxpayers - not getting paid.
Edit #1: This is a good read: Stubborn Lenders

Much, much more when the filings start hitting the docket. All I can say...Fiat 1 - U.S. Taxpayers 0. The Chrysler bankruptcy is going to be an interesting one.


BobH,  5/03/2009  

Ironic to talk about what Cerberus gets for its giveup of the equity stake. I think Feinberg took more out of Chrysler as has been his wont in several forced bankruptcies. He broke Mervyns into two parts and killed the weak side, sold off the better part. GMAC was supposed to starve out GM and then force it into a merger, but he just ended up killing GM. Residential Mortgage and General Communications went down due to Cerberus, giving the CEO of the latter a fatal heart attack. Cerberus could be renamed "Vivisections Incorporated" for its sucking out the marrow of every holding it has. Feinberg may be single handedly responsible for more layoffs than any other human being on earth. Leveraged them up to take a distribution, and then selling what is left.


hunter [at] distressed-debt-investing [dot] com

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I have spent the majority of my career as a value investor. For the past 8 years, I have worked on the buy side as a distressed debt and high yield investor.