Monday, May 4, 2009

For Now, Judge Gonzalez Siding With Chrysler Creditors

In an event that just as easily may not have occurred, Judge Gonzalez presiding over the boiling hot Chrysler bankruptcy, has sided with an objection of the Chrysler Non-TARP creditors (aka abominable hedge funds). The issue at hand was a request for a delay of the hearing on Section 363 bidding procedures from today until tomorrow at 2:30 pm. If Lehman's bankruptcy is any indication, this is the kind of objection that would have been quickly steamrolled by Judge Peck on his route to bankruptcy Superstardom (the latter has used the words "biggest bankruptcy in history" approximately 240 times to date, according to docket records). Could it be that Gonzalez is actually an adherent to due process and will give both sides in this bankruptcy a fair chance?

Either way, as Zero Hedge speculated yesterday, today's court hearing was indeed a mini drama after Tom Lauria disclosed to Judge Gonzalez that some Chrysler creditors had received death threats. While the threats have been referred to the FBI, it is obvious why Lauria is set on keeping the identities of the 20 hold outs secret at this point.

Among the other disclosures today was the statement by Robet Manzo of Capstone that not only is the U.S. government not charging interest on the Chrysler DIP but that there is a "low probability" that Chrysler would be able to repay the loan. This means that the UST could lose as much as $8 billion in this bankruptcy, an amount which includes the $4 billion already loaned in January. Also uncovered was the new projection for legal fees associated with the Chapter 11, which has grown from $20 million a week ago to a cool $30 million currently (this is not the last iteration of the number).

Lastly, Corinne Ball of Jones Day had this to say about the situation:
"The survival of Chrysler's business is at stake in these proceedings, as is the fate of hundreds of suppliers and thousands of Chrysler dealers around the country. Absent immediate action, (Chrysler) will lose the only opportunity available to them to preserve their business as a going concern and to avoid the economic devastation that will occur if Chrysler's business, and Chrysler's suppliers and dealers, are forced to shut down."
These are, almost verbatim, the same words used by Harvey Miller, Lori Fife and Shai Waisman when the Weil Gotshal legal team steamrolled through any and all objections to sell Lehman's Broker Dealer division a mere 4 days after the bankruptcy filing (and with uber-Judge Peck's blessings all the way). It is yet to be seen how quickly Gonzalez caves. Sphere: Related Content
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