Professor Steven Davidoff writes in DealBook at the NYT about the real deal behind the scenes business of the Chrysler bankruptcy filing. The reality is, based on an IRS Section 363 sale, that there is NO CASH left at this firm to pay creditors. A section 363 sale transfers the acquired assets free and clear of any liens, claims and encumbrances. The power of the section 363 order to cleanse troubled assets propels many acquirers to condition their purchases on the Chapter 11 filing of troubled sellers to obtain its benefits.
"Defective drivetrain, no problema, Obama's got yo back!"
Sunday evening, Chrysler filed the documents related to the proposed sale of its business. Chrysler, backed by the federal government and the United Auto Workers (Ahem?), is petitioning to sell its business to a “newco” in an expedited procedure under Section 363 of the bankruptcy code.
When you sell lemons, even the lemonade is unpopular!
The goal is to push the sale through over any objections from senior secured lenders and allow the Chrysler business to be purchased by Fiat, the UAW’s retirement trust and the United States and Canadian governments. Once the newco purchases the Chrysler business, it will change its name to Chrysler, and the old Chrysler will similarly change its name to something without Chrysler. New Chrysler will then continue on its hopefully successful way. Behold the magic of bankruptcy at work. When your car sales collapse 48%in April, there may be a trend behind that. Sales in 2008 slumped 28% below 2007, meaning that this DOG sold a third of cars DUMPED just two years ago, when Daimler said, Vergesst es!
Some fine carmakers like the Gremlin's AMC have gone BK too!
Allpar’s data shows industry sales collpased 34% Y-Y, a third better than Chrysler. April’s seasonally adjusted annualized sales rate (SAAR) dropped back to 9.32 million light vehicles, a half-million-unit decline from March 2009 and a 5.2 million-unit drop from April 2008. It’s the second-lowest SAAR since the early 1980s and it may temper hopes that the market is rebounding. “Analysts” had been looking for a SAAR in the 9.8 million unit range- down from 12 million predicted in ‘08.
Section 363 bankruptcy filings allow the creditors to be told- Tough F*ing Luck! Except for the post-bankruptcy creditors… So this vehicle is being used to pay the “service providers” like lawyers and bankers from the taxpayer till. Findlaw admits:
While bankruptcy judges have generally become receptive to Section 363 sales, not every judge will approve buyer protections as presented by the parties. Some courts, like those in the Second Circuit and the Southern District of New York, apply a relatively lenient “business judgment standard” and allow break-up fees and expense reimbursement if they represent a reasonable exercise of the DIP’s business judgment. Others, like RealClearMarkets see it really clearly: Screw Secured Creditors…
Consumers- nice Chrysler models on June sale !
And for your $12B investment, taxpayers, soon to jump to $20B: These are the stats of a dead company: Cars -61 percent, Trucks -44 percent. Yes, the Wrangler is up. Ram is only down 26 percent, with 17,903 moving in April. Otherwise things range from the bad (Grand Cherokee -45 percent, Journey -33 percent, 300C -49 percent) to the ugly (Sebring -75 percent, Compass -75 percent, Durango -87, PT Cruiser -76 percent, Avenger -76 percent, etc.). American taxpayer, I hate to be the one to say it, but you’ve made one lousy investment.
And now taxpayers are stuck with the warranty liability due to this asset sale- how much is that gonna cost us? And CNN’s Fortune also discloses that John Snow’s Cerberus controls 11% of the domestic auto finance market: More importantly for Cerberus and its investors, Chrysler Financial’s future business will be folded into GMAC, the auto finance company that the private equity firm bought from GM in 2006. “GMAC and Chrysler Financial are effectively being merged,” says David Whiston, an analyst who covers GM for Morningstar. “This could be a very profitable endeavor for Cerberus if they continue to have a stake in GMAC.” Oh, and there’s more to the Chrysler-GMAC Financial story- Citi and JPM benefit from Chrysler’s unwillingness to face executive pay limits from government financing through that channel. Loathsome – is the takeaway!
