(2009-04-30) Chrysler Bankruptcy

President Barack Obama forced Chrysler into federal Bankruptcy protection on Thursday so it could pursue a lifesaving alliance with the Italian automaker Fiat, in yet another extraordinary intervention into private industry by the federal government... Mr. Obama announced a plan that would allow the United Automobile Workers (UAW), through their retirement plan (Pension), to take control of Chrysler, with Fiat and the United States as junior partners. The government would lend about $8 billion more to the company, on top of the $4 billion it had already provided.

In the restructuring Cerberus agreed to waive its share of $2 billion in Chrysler debt and forfeit its equity stake and ownership of the company's Michigan headquarters... Cerberus is keeping the finance arm of the automaker and could profit on that investment as the portfolio of loans get paid off. The buyout shop's total equity exposure to Chrysler is around $1.2 billion, The Journal said, citing a person familiar with the matter. Most of that's gone now, as is $500 million in second-lien loans, the newspaper said.

A group of Chrysler's secured lenders, contending that they are being unfairly blamed for sending the automaker into bankruptcy protection, are striking back at the Obama administration, which they believe is skirting bankruptcy law by forcing them to take a larger loss on their debt than other Chrysler stakeholders. The group, which is calling itself the Committee of Non-TARP Lenders, said Thursday that it had been compelled to negotiate through a group of big banks, including J P Morgan Chase and CitiGroup, that have accepted government bailout money and so are reluctant to push back against the Treasury Department's proposal. Interesting Conflict Of Interest.