Thursday, April 30, 2009

Chrysler To File Any Minute, Hedge Funds Blamed

Of course, as expected, the White House is placing the full blame for the impending bankruptcy on the hold out hedge funds. Here is the stupendously hypocritical statement releaseed from the White House:

"[The hedge funds'] failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders nor will it impede the new opporunity Chrysler now has to restructure and emerge stronger going forward."

How dare these hedge funds believe that debt covenants have any value under the current administration? After all, Obama himself is telling you that your economic interests have to align with the national ones. As long as they diverge, you can expect to pay 99% of all income as taxes in perpetuity compliments of soon to be implemented legislation out of Barney Frank.

By the way, isn't it ironic that one of the biggest culprits for the hedge fund dissent, and member of the Chrysler steering committee, Perella Weinberg is the same company that is advising the FDIC on its actions with regards to bank liquidations? One would think Sheila Bair only needed to make one phone call to put Joe Perella in his place. Maybe she lost his number.

In the meantime, this is the release from the ad hoc group of GM bondholders, who still have the audacity to believe in free capitalism, but nonetheless are next in line for UAW-sponsored and White House greenlighted tar and feathering.

Ad Hoc Committee of General Motors Bondholders Proposes Plan to Save GM
Bondholder Plan Saves US Taxpayer $10 Billion, Avoids Nationalization

Fair and Equitable Allocation of New Equity Among All Stakeholders

Business Wire

NEW YORK -- April 30, 2009

The Ad Hoc Committee of General Motors Bondholders today released its proposed plan to save General Motors (GM) and avoid a lengthy and difficult bankruptcy process that would hurt all stakeholders, employees and customers. This proposal will save US taxpayers $10 billion in cash, prevents the nationalization of one of the country’s largest companies and provides for a fair and equitable allocation of new GM equity across all stakeholder classes.

According to Eric Siegert, senior managing director of Houlihan Lokey Howard and Zukin and financial advisor to the Ad Hoc Committee, the bondholder proposal is reasonable and equitable and provides for all parties to share equally in the future of GM.

The proposal involves allocating new GM equity equally across the board to union VEBA and GM bondholders, pro rata to the level of financial obligation owed to each by GM. There would be no cash component in this proposed restructuring and the US Government would not own any equity. The union VEBA, based on the current $20 billion in health benefits obligations it owes to retirees, would own 41% of the new GM. Bondholders, as a result of their $27 billion of notes outstanding, would own 58% of the new GM. Current shareholders would retain 1% of the equity of the new GM.

“Freed of its obligation to make cash payments to the VEBA or bondholders, the US Government would not have to convert any of its $20 billion in loans to equity and dramatically reduce the need to make additional loans,” said Siegert.

“Our proposed restructuring is quite simple. We will save the American taxpayer $10 billion in cash that would have been spent under the Government’s proposed plan. We think that this is an extremely attractive proposition given our current fiscal crisis,” said Mr. Siegert.

Siegert continued, “Unlike the current proposal, our plan does not grant a controlling interest in GM to the federal Government. We do not believe that nationalizing one of America’s largest and most important companies is the right policy decision for our country. And finally, any reasonable person reviewing our plan would come to the conclusion that a completely fair and even allocation of new GM equity pro rata to the obligation that GM owes each stakeholder is the best way to resolve competing claims in an out-of-court process.”

Siegert said that the GM bondholders understand that sacrifice and pain is necessary to get to a fair solution of the current financial situation facing GM. That is why the bondholders have proposed to convert their entire claim to equity so long as others are willing to do so as well.

“We want to see GM emerge as a stronger and viable manufacturer, providing thousands of jobs and products that appeal to consumers around the world. While we have not seen the revised business plan being developed by the Company and the Auto Task Force (ATF), we commit to working constructively with all parties on a plan that sets GM on the right path forward towards a financially healthy, operationally sound competitor. We will present our ideas to the ATF this afternoon and look forward to an ongoing dialogue and an agreement that is fair and equitable to all parties. Time is of the essence, and we stand ready to engage with all the parties to get to a solution that works,” Siegert said.

Sloane & Company
Elliot Sloane, 212-446-1860 Sphere: Related Content
Print this post
blog comments powered by Disqus