A group of minority lenders opposing Chrysler LLC's attempted sale were dealt another legal setback yesterday, moving the embattled auto maker a step closer to a planned alliance with Italy's Fiat SpA.
The size of the dissident group, which accounted for almost $1-billion (U.S.) worth of Chrysler's $6.9-billion in debt when the company's bankruptcy proceedings began last Thursday, has already shrunk to $300-million as some debtholders appear to have abandoned the fight, according to filings in a Manhattan court.
Now it looks as though the opposition ranks may become even smaller. Judge Arthur Gonzalez ruled that these debtholders, the majority of which have not disclosed their names, must reveal their identities by 10:00 tomorrow morning.
Most of the lenders are afraid to step forward because they have received death threats, and fear they will be singled out for retribution, said their lawyer, Tom Lauria. He argued that the lenders have been "wrongly accused" of being speculators by President Barack Obama and other high-ranking government officials, and that the public derision had made them targets.
Judge Gonzalez was unmoved by the arguments, noting that the threats consisted of a handful of anonymous online postings on a Washington Post discussion board, and said the group failed to demonstrate that police were treating the comments as "bona fide."
Judge Gonzalez was scheduled to issue another ruling last night on whether to approve Chrysler's sale motion, which would outline the terms of a bidding process.
Lenders representing 90 per cent of Chrysler's debt have already agreed to support the restructuring, in which the U.S. government would give them $2.25-billion for the $6.9-billion in debt they hold, or about 29 cents on the dollar. They include major banks such as JPMorgan, which have received government bailout money through the Troubled Asset Relief Program, or TARP.
The dissidents believe they may recoup more of their money if Chrysler were liquidated, rather than folded into an alliance with Fiat. Further, they insisted yesterday that Chrysler and the U.S. government have crafted a sales process that prevents them from making their own counteroffer.
Chrysler, which filed for bankruptcy protection after it failed to iron out a deal with the dissidents, is pushing for a quick and "surgical" restructuring it hopes can be completed within 60 days. It has asked the court to rule on a sale of the assets to Fiat by May 21.
On Monday, Judge Gonzalez approved a motion for the auto maker to begin accessing a $4.5-billion debtor-in-possession loan from the U.S. and Canadian governments to help it continue operations while in bankruptcy proceedings.
A senior Chrysler adviser told the court Monday there was a "low likelihood" that governments would recoup this DIP financing, since they rank behind secured lenders. Canadian Finance Minister Jim Flaherty conceded as much at a press conference yesterday, when asked whether he was confident the loan would be repaid.
"Do I have every confidence? No," Mr. Flaherty said, noting that Fiat chief executive officer Sergio Marchionne's plan to return Chrysler to profitability has to be successful. Still, Mr. Flaherty endorsed Mr. Marchionne's vision, saying Fiat's stable of smaller cars will make Chrysler more competitive. "This augurs well for success in the longer term," he said.
With files from reporters
Kevin Carmichael in Ottawa and Karen Howlett in Toronto
