Wednesday, May 27, 2009

The Chrysler Travesty Hearings Continue Tomorrow

Nothing too exciting today at One Bowling Green, just 10 hours of cross examinations of Tom Lasorda, former president and Vice Chairman of Chrysler, Alfredo Altavilla, chief executive of Fiat's powertrain business and, most notably, Robert Manzo of Capstone's Advisory Group, the de facto financial advisors for Chrysler (yes, Greenhill, we know you are submitting monthly invoices too, a question arises what exactly for, but taxpayers will let that slide for now). I say de facto, because Chrysler's Liquidation valuation analysis was prepared and submitted as an expert report by Capstone, so one would imagine they would have to be unbiased, objective, and fair. I will get back to this in a second.

I mentioned Robert Manzo, who had a very critical role in today's hearing. First, i present Robert's Curriculum Vitae, which is Exhibit A in the above filing.

Based on this, one would imagine that Mr. Manzo may, in principle, pass as an auto expert, even though looking at his debtor representations, which include Cumberland Farms/Gulf Oil, Camelot Music and Virgin Entertainment, one would presume Mr. Manzo is better suited to prepare "expert reports" for the likes of CBS, Omnicom, and other entertainment-related companies.

Now as part of his obligation to find the best and final bid for Chrysler, Mr. Manzo was busy. He was so busy he contacted a whopping 9 entities (presented below, Exhibit B from the above filing), of which he executed a confidentiality agreement with one single party. Presumably Mr. Manzo was busy thinking of what is the best way to invoice 23.5 hours a day for his hard "bankruptcy" work instead of actually trying to see if there are any interested overbidders to the Fiat stalking horse bid.

However, what demonstrates beyond a reasonable doubt how Mr. Manzo (and Capstone) transformed their financial advisory obligation into a complete procedural travesty is the following: Glenn Kurtz, a White & Case attorney who represents the Indiana pension funds, procured an email during discovery. It captures Mr. Manzo's reaction to a proposal of eliminating the banks' secured debt after they rejected a pittance equity stake in Chrysler, and I quote:
"Oh baby!!!!!!!! They get what they deserve."
Now that email from anyone else would be explainable - after all in the Chyrsler case there is a plethora of obviously conflicted entities (the U.S. government aka the UAW being #1) who had everything to gain and nothing to lose by screwing over the secured lenders. However, that particular phrase, coming from the man who singlehandedly put together Chrysler's liquidation analysis - the cornerstone for the entire case, upon which rests the premise that there is really no value here to creditors unless the sale is completed in the fastest fashion imaginable - is simply borderline criminal (or criminally stupid - not sure which).

The following is a statement from Manzo which explains why his "expert" opinion in this case should be unbiased and impartial:
"Under the May 20 Liquidation Analysis, the First Lien holders are expected to recover less than 18% of their secured claims at the time of filing. In fact, on the low end of the range, if Chrysler’s assets must be liquidated, the First Lien holders may not recover anything at all for their claims."
If Judge Gonzalez is so stupid to be unable to put two and two together, and to notice this clearly inexcusable and impermissible bias from a "valuation expert" then he should simply be disbarred from his judicial role.

The entire liquidation analysis prepared by Manzo and Capstone is presented below. When read in the context of the email discovery presented above, this report has zero credibility, and it also destroys the credibility of Mr. Manzo as an expert witness in any future testimony (if nothing else, then simply for lacking any foresight that all his emails would be subject to discovery and a phrase like the one above, under circumstances where he did not have Barack Obama on his side, would have been a dealbreaker).

Tomorrow, the complete travesty that is the Chrysler bankruptcy case continues. As the final outcome of this rigged from the beginning bankruptcy at this point is more than obvious, Zero Hedge has decided against sending representatives to the hearing, as it would be a complete waste of time.

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