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Obstinate creditors seek secrecy
May 4th, 2009

Chrysler creditors who are seeking to avoid the quick sale of the “good assets” are now trying to keep their companies’ names secret, with an attorney claiming that he has received death threats, according to the Detroit News. Perhaps more to the point, some investors have already started pulling their funds from the companies that helped send Chrysler into bankruptcy, with Oppenheimer Funds being the most visible. Michigan’s legislature has decreed that the state will divest from the three lead funds that held out for more cash, angrily claiming that retirees and auto workers were being put ahead of banks and hedge funds. Presumably, if the names of all the creditors now challenging the Treasury plan were exposed, they could also face financial repercussions.


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Dissident Lenders Are Half Original Size

Chrysler Dissident Lenders Are Half Original Size, Filing Shows

May 5 -- Chrysler LLC secured lenders who seek to block an auction of most company assets to an entity managed by Fiat SpA, have dwindled in number and now hold only half the portion of a $6.9 billion loan they did, a court filing shows.

JPMorgan Chase & Co., the largest lender on the loan, found the holdouts last week held about 10 percent of its value, less than $700 million. Now those still in the group, who plan to oppose the auction at a hearing today, own only about $300 million, the holdouts said in a bankruptcy court filing.

In the filing, the lenders told the judge in charge of Chrysler’s bankruptcy that the carmaker’s plan to auction its best assets later this month was unfair because it prevents creditors from using claims like a loan to make a non-cash bid.

“The proposed sale is not an arms’ length bargain but rather is tainted by government domination and control,” the group said in the filing in U.S. Bankruptcy Court in New York.

The group refused last week to share in a $2.25 billion buyout for a $6.9 billion Chrysler loan that the U.S. government wanted off the books to keep the carmaker out of bankruptcy. President Barack Obama criticized them for speculating at taxpayers’ expense and said their opposition tipped Chrysler into bankruptcy.

The group asked U.S. Bankruptcy Judge Arthur Gonzalez not to reveal the identities of its members, after he ordered them yesterday to do so by today. Thomas Lauria, a lawyer for the group, told the judge some of his clients had received death threats after being identified.

Identified Lenders

Those named publicly include OppenheimerFunds Inc., Perella Weinberg Capital Management LP’s Xerion hedge fund and Stairway Capital Advisors. Perella withdrew its sale objection last week.

In their request, filed today in Manhattan court, the lenders said some joined only with the promise of anonymity and would leave if they were forced to reveal their identities.

“Denial of this relief will force several of these lenders to surrender their legal rights and agree to the government’s illegal plan,” lawyers for the group wrote.

A call to one of Lauria’s partners, Gerard Uzzi, wasn’t immediately returned.

The lenders claim in their court filings that the U.S. government is subverting federal bankruptcy law by forcing lenders to agree to a reorganization that repays unsecured creditors ahead of some secured creditors.

The group, calling itself Chrysler’s non-TARP lenders, in reference to aid other creditors got from the federal Troubled Assets Relief Program, said the proposed auction would prevent a so-called “credit bid” from its members.

Credit Bid

Under a credit bid, parties use debt to buy a company. The group also seeks to block the proposed sale to an alliance led by Fiat, as well as a request by the U.S. automaker for approval of a $4.5 billion Treasury loan to finance the reorganization.

In a footnote, they cited a requirement that any competing bid include 10 percent of the purchase price in cash. That “appears designed specifically,” to prevent non-TARP members from making a credit bid, using the full amount of their secured claim, they said.

The group also objected to rules that would require all competing bids be subject to the same terms as the proposed transaction with the government and Fiat, which are financing the reorganization and providing small-car technology, respectively.

Because bids need to be made in a week under the proposed timeline, there isn’t enough time for parties to make due diligence required for a competing bid, the holdouts said.

Secured Lenders

The group has pitted itself against secured lenders that agreed to the Fiat deal, including JPMorgan, Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc., saying those institutions had conflicts of interest because they had accepted TARP funds, which included some government controls.

The four largest banks hold $4.83 billion of the debt, or about 70 percent.

In a related move, a group of Chrysler LLC unsecured creditors formed an 11-member committee today at a meeting in a midtown Manhattan hotel that will include the United Automobile Workers union, trade groups, car dealers and lawsuit plaintiffs.

U.S. Trustee Diana Adams, who represents the Justice Department in the Chrysler bankruptcy case filed last week in Manhattan federal court, appointed the committee members at a meeting today. The automaker is seeking court approval of a sale that would create an alliance with Fiat, forming the world’s sixth-largest carmaker.

“All of the major shareholders are supportive of this transaction,” Chrysler spokesman Fredric Spar said outside the meeting, without referring specifically to the new committee.

The new company created by the auction asset sale would be owned by the United Auto Workers, Fiat, the U.S. Treasury and the Canadian government, Chrysler has said. Fiat’s 20 percent stake could be increased to 35 percent if the company meets certain milestones, the company has said.

The case is In re. Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

Article Link:Chrysler Dissident Lenders Are Half Original Size, Filing Shows -

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Disclosure of Chrysler Creditors Is Ordered

May 6, 2009

Disclosure of Chrysler Creditors Is Ordered

A federal bankruptcy judge in Manhattan on Tuesday ordered the disclosure of identities of Chrysler creditors fighting a proposed sale of the company’s assets to Fiat.

The creditors claim that the sale, which is backed by the Obama administration and the company’s managers, will short-change them by billions of dollars.

But the creditors have also asserted that their identities should be kept secret to protect them from retaliation; a lawyer representing them claims that these investment firms have been harassed and creditors have even received death threats.

The bankruptcy judge, Arthur J. Gonzalez, gave the creditors until Wednesday morning to reveal their identities.

The judge said that the creditors’ lawyers had not presented enough evidence of risk, saying that the lawyers’ assertions fell "woefully short."

The decision over the disclosure was among the first matters considered by Judge Gonzalez at a hearing in the Chrysler bankruptcy case that stretched from midafternoon until well into the evening.

The main consideration at the hearing was a motion on the bidding procedure for the sale to Fiat, the Italian carmaker. The deal is the central component of the government-sponsored reorganization plan that would form an alliance between the two companies.

This group of lenders, primarily small investment firms, argues that Chrysler may fetch more in a liquidation than with the Fiat proposal, in which several Chrysler assets would be sold to a new entity held by the United Automobile Workers union, Fiat, and the United States and Canadian governments.

Yet Robert Manzo, an executive with the Capstone Advisory Group who is advising Chrysler, testified Tuesday that based on an analysis he conducted in January, updated with the carmaker’s current cash levels, the company could fetch as little as nothing if it were liquidated today.

In a court filing seeking confidentiality for the holdout creditors, lawyers for those investment firms said that the group had been harassed, citing several postings on The Washington Post Web site. Judge Gonzalez and lawyers questioned whether those anonymous posts constituted real threats.

One of those lawyers, Thomas E. Lauria of White & Case, also cited the derisory comments made by President Obama last Thursday, criticizing the holdouts as “speculators.” He has cited the threat of embarrassment and public pressure as the reason that one former client, Perella Weinberg Partners, switched sides and joined the government-sponsored Chrysler reorganization plan.

“The accuser was wearing the mantle of the executive branch,” Mr. Lauria said in Tuesday’s hearing.

Lawyers representing Chrysler and Fiat said that it was crucial to the case to know the holdouts’ identities.

“It’s a bit ironic, your honor, that what Mr. Lauria is complaining about is anonymous postings on the Internet,” a lawyer for Fiat, Hydee R. Feldstein, said in court. “Anonymity promotes irresponsibility.”

When the debtholders, calling themselves the Committee of Non-TARP Lenders, made their first public statement last Thursday, they said their group consisted of about 20 investment firms holding about $1 billion. According to their motion to file under seal, the group now claims about $300 million in holdings.

Chrysler and the secured lenders that have agreed to its reorganization plan claimed in Monday’s hearings to have more than 90 percent of the debt amount and about 60 percent of the number of creditors on their side.


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Oppenheimer Quits Fund Group Resisting

Oppenheimer Quits Fund Group Resisting Obama Chrysler Plan

May 8
OppenheimerFunds Inc., the only mutual fund manager listed among opponents of the U.S. government’s restructuring plan for Chrysler LLC, dropped out of the effort, precipitating the collapse of the dissident lenders’ group.

The $1.3 billion Oppenheimer Senior Floating Rate Fund, whose stated goal is to preserve investors’ capital, bought $83 million of the debt. It was the fund’s third-largest holding as of Jan. 31. OppenheimerFunds also bought the debt for other funds and ultimately held about $100 million.

The Chrysler investment pitted OppenheimerFunds’ fund co- managers Joseph Welsh and Margaret Hui, along with hedge funds and distressed debt investors, against President Barack Obama, who blamed the holdouts for forcing the automaker into bankruptcy on April 30. Their continued opposition threatened plans to sell the automaker’s assets to Fiat SpA.

“It’s a surprise that Oppenheimer was in there,” Geoff Bobroff, president of Bobroff Consulting Inc. in East Greenwich, Rhode Island, said in an interview. “The mere fact that it was a distressed investment doesn’t preclude them from investing, but I don’t view Oppenheimer as a distressed investor.”

OppenheimerFunds, an asset-management unit of Massachusetts Mutual Life Insurance Co. of Springfield, Massachusetts, accumulated the debt beginning in the first half of 2008 after banks sold it for below 70 cents on the dollar. Chrysler’s loan is now valued at 27 cents on the dollar. The Oppenheimer Master Loan Fund LLC also bought $11 million of the debt at distressed prices, filings show.

Objections Withdrawn

OppenheimerFunds “has determined that the senior creditors can no longer reasonably expect to increase the recovery rate on the debt they hold by opposing the Taskforce’s restructuring plan,” the New York-based company said in a statement today.

Within an hour, the rest of the group, calling itself Chrysler’s Non-TARP lenders, withdrew objections to the sale to Fiat, said Tom Lauria, the White & Case attorney representing the group.

“After a great deal of soul-searching and quite frankly agony, they concluded they just don’t have critical mass to withstand the enormous pressure and machinery of the U.S. government,” he said.

The Chrysler debt was “typical” of the type of investments that the fund makes because it gave shareholders the opportunity to collect income while being senior in the capital structure, OppenheimerFunds’ spokesman Bruce Dunbar said in an interview. The debt hasn’t affected the fund’s returns this year, he said.

Last year, the fund fell 30 percent, Bloomberg data show.

High-yield, or leveraged, loans are rated below Baa3 by Moody’s Investors Service and lower than BBB- by S&P. Senior secured loans are repaid first in bankruptcy, ahead of bonds and equities.

Loan Underwriters

Chrysler’s $7 billion term loan was underwritten in 2007 by JPMorgan Chase & Co., Goldman Sachs Group Inc., Bear Stearns & Co., Morgan Stanley and Citigroup Inc. to back Cerberus Capital Management LP’s takeover of the automaker from DaimlerChrysler LLC.

Moody’s rated the automotive division of Auburn Hills, Michigan-based Chrysler at B3, six levels below investment grade. S&P graded the company one level higher.

The banks twice failed to offload the debt as the financial crisis reduced demand for all but the safest investments. In April 2008, Goldman sold $500 million of the loans at 63 cents on the dollar to a group including hedge funds.

The lenders who opposed the administration’s plans for Chrysler were singled out by Obama on April 30.

“A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” President Obama said last month in Washington before Chrysler filed for bankruptcy protection.

Perella Weinberg

Other members of that group included Perella Weinberg Capital Management LP, Stairway Capital Management LP, Group G Capital Partners LLC and Schultze Asset Management LLC.

The lenders wouldn’t support the Obama plan to restructure Chrysler after they were offered $2.25 billion in exchange for $6.9 billion of the debt, or 33 cents on the dollar. The government offer would pay the group $2 billion, or 29 cents on the dollar.

After the administration statement, Perella changed its stance to support the plan, and today Stairway said it was withdrawing from active participation in the automaker’s bankruptcy case moments after OppenheimerFunds’ announcement.

OppenheimerFunds “shares the goals of all Chrysler stakeholders seeking to strengthen the automaker,” the firm said in today’s statement. The firm at all times “has balanced this objective with our fiduciary duty to the mutual funds we manage and their thousands of individual shareholders,”

OppenheimerFunds isn’t related to Oppenheimer Holdings Inc.

LINK:Oppenheimer Quits Fund Group Resisting Obama Chrysler Plan -
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