More Chrysler Bankruptcy Information

So the docket is beginning to fill up: Chrysler Bankruptcy Information

As of 12/31/2008, the "Chrysler Companies" (as defined as debtors and non-debtors direct and indirect subsidiaries) listed $39.3B of assets and $55.2B of liabilities. Revenue in 2008 looks to be $48.4B.

From the joint administration filing: Under a liquidation "Chrysler's first lien secured creditors will receive net present value recoveries of less than 38 cents on the dollar and possibly as little as 9 cents; the U.S. government, another secured creditor, will receive less than that; and Chrysler's unsecured creditors will receive nothing."

And the real juice: Chrysler Bankruptcy Affidavit

My takeaways:
  • Filed by the CFO, Ronald Kolka.
  • Goes on to talk about how imperative it is to avoid a liquidation.
  • Asking the Court to approve a 363 sale, financially backed by the U.S. Gov't
  • 30% of first lien debt holders are against the sale. The affidavit goes on to say that Chrysler bank debt trades at 15 cents on the dollar. That is definitely not the market that a certain dealer that starts with Goldman and ends in Sachs is making right this very moment.
  • Goes on to talk about the things I talked about in my last post: Chrysler Bankruptcy
  • Upon consummation of the 363 sale, the major assets of old Chrysler would be 8 manufacturing facilities, and related machinery and equipment with a book value of $2.3B. The U.S. Gov't would provide $200M through the DIP loan to run a wind-down and sale of the estate.
  • Description of Business: No need to rehash what everyone knows.
  • Organizational and Capital Structure: Outstanding amount under the First Lien is $6.9B (as of petition date). Secured by first lien in all Chrysler's assets, a 65% equity pledge of foreign subs, and other guarantees. $2B second lien delayed draw term loan. $4B TARP loan, third lien to first lien's security. $5.3B of trade debt.
  • Events Leading to the Petition: Again, everyone knows this. Blame Cerberus.
  • More talk on the FIAT alliance
  • And lots of first day motions, fairly typical in nature.
Here is Balance Sheet:

We can try to put some kind of recovery on each of these assets, and compare to the $6.9B of First Lien Bank debt (and some trade, estimated at $800M, will have critical vendor status / 20 day rule [503b9 claims], as well as bankruptcy administration fees).  

Assuming bankruptcy fees of $1B and $800M of "20-day claims" are ahead of you, at 25-30 cents on the dollar, the bank debt is implying $3.5B-$3.8B of value. Versus $39B of listed assets, with $1.9B of that cash.  Doesn't seem that too far of a stretch - unless the DIP gets super priority, and primes the shit out everyone. Maybe those crazy hedge fund pirates holdouts had the right idea. 

There are some other interesting affidavits from the head of manufacturing, head of procurement, head of dealers, etc. These are filed under Dockets Item Numbers: 48-54. They are interesting reads. Basically go on to say how imperative this Fiat deal is to everyone in the world. 

More tomorrow on the Chrysler bankruptcy.


Lawrence D. Loeb 5/01/2009  

What do you think of this DIP term sheet? I think it's more extortionate than most of the agreements I’ve seen.

You might want to look at this blog that I just found. He writes more towards the legal issues, but we need to understand those to figure out what the securities are worth. It’s important to know the terrain when you go to war.

VNL 11/06/2009  

Cundill Manager Surprised by Chrysler's Cash Flow




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About Me

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.