Tuesday, May 5, 2009

Judge Gonzalez Greenlights 363 Process, Redlights Justice

After a marathon session in bankruptcy court today, where many wide eyed female legal interns wearing fishnets and mini skirts to impress senior partners initially, are now merely bleary eyed, Judge Gonzalez decided to follow in Peck's footsteps, and to approve a procedure which would require a competing bid to the existing Fiat bid to emerge in about a week.

Judge Arthur Gonzales says the procedures proposed by Chrysler's lawyers represent a "clear and orderly process."

Attorneys for Auburn Hills, Mich.-based Chrysler LLC argued that the automaker had essentially been up for sale for most of the last two years and a speedy sale was needed in order to preserve the value of the company's assets.

What is notable is that during a witness testimony in court today, a Chrysler staffer under oath said that Chrysler had previously been in discussions with Nissan, GM and Fiat for alternative value enhancing programs, which had a Net Present Value of $11 Billion, $36 Billion and 4 Billion, respectively. And yet per the Sale Motion, Chrysler creditors (TARP and Non-TARP) will receive a mere $2 billion from Fiat now, in exchange for the Dodge-maker's good assets. The Purchase Agreement section from the sale motion says it all:

After an intense period of effort to meet the government's 30-day timeline, Chrysler, Fiat and New Chrysler reached an agreement in principle by the deadline and then quickly entered into the Purchase Agreement. Pursuant to that agreement: (a) Chrysler will transfer substantially all of its operating assets to New Chrysler; and (b) in exchange for those assets, New Chrysler will assume certain liabilities of Chrysler and pay Chrysler $2 billion in cash. In connection with the closing of the proposed Fiat Transaction, (a) Fiat will contribute to New Chrysler access to competitive fuel-efficient vehicle platforms, certain technology, distribution capabilities in key growth markets and substantial cost saving opportunities, and (b) New Chrysler will issue approximately 55%, 8% and 2% of the Membership Interests in New Chrysler to a new voluntary employee beneficiary association (a "VEBA"), the U.S. Treasury and the Canadian government, respectively. After the Fiat Transaction is consummated, a subsidiary of Fiat will own 20% of the equity of New Chrysler, with the right to acquire up to an additional 31% of New Chrysler's Membership Interests under certain circumstances.

And, as in the Lehman case, the best asset of the bankrupt company is about to be stolen from under the noses of creditors, as the Judge is willing to appease the even bigger powers that be, using the threat that all hell could break loose if the deal is not consummated in T minus 0 nanoseconds. Same old song and dance. Will the last person leaving please turn off the lights on due process.

Interestingly, Chrysler advisor Greenhill & Co, run by former Morgan Stanley president, former Smith Barney CEO, bankrupt Yellowstone Club tennant, and lover of trashed $500,000 Porsche Carerra GTs, Bob Greenhill, apparently was unable to solicit any stalking horse bids higher than $2 billion.
Gonzalez also approved a $35 million breakup fee for Fiat if it’s outbid at the auction. Chrysler’s financial adviser, Greenhill & Co., said the Fiat offer was fair and the only deal available to Chrysler. Fiat’s 20 percent stake in the new company could be increased to 35 percent if certain milestones are met, the company has said.
One would question whether the good bankers at Greenhill even had time to go to the bathroom inbetween the time the bankruptcy was announced and when they had to present their status report, let alone draft even a teaser (forget about a full blown CIM) for Jeep Cherokee and Dodge Neon. Maybe as part of public disclosure (it is public bankruptcy court after all), the creditors can request the documentation the shows how many companies were contacted as part of the Stalking Horse selection process and what were indicative bids.

Alternatively, if any readers have two billion and one dollars burning a hole in their pocket and want to start a 363 auction fight which would derail the administration's scheme, just think of all those Dodge Vipers you would be getting for a sum that in 5 years of hyperinflation will likely buy less than one roll of toilet paper (one-ply, just like US 30 Year Treasuries). Sphere: Related Content
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