(Bloomberg) -- President Barack Obama thanked everyone from unions to executives for working to keep Chrysler LLC alive while blaming “a small group of speculators” for forcing the automaker into bankruptcy.
“A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” Obama said yesterday in Washington before Chrysler filed for bankruptcy protection.
Now, the government and Chrysler plan to use bankruptcy to compel the dissidents, all secured creditors, to go along with a plan to create a more viable carmaker in partnership with Italy’s Fiat SpA. In lashing out at the holdouts, Obama is attempting to rally the public behind his efforts to rescue the automaker, said Stuart Rothenberg, a Washington-based political analyst.
“In the real world, you have good guys and bad guys, and at the moment, auto executives, hedge-fund managers and bankers are all in the bad-guy category,” said Rothenberg. “He wants to be the guy who’s solving the problems and wants to make it clear who’s causing the problems.”
An anonymous group of 20 Chrysler lenders calling itself the “Committee of Chrysler Non-Tarp Lenders” said in a statement yesterday that they’d been treated worse than junior creditors during negotiations in violation of “long-recognized legal and business principles.” They said they were owed $1 billion.
Their loans are trading at about 15 cents on the dollar, Chrysler has said. TARP is the U.S. Troubled Asset Relief Program for banks.
OppenheimerFunds, Stairway
The dissidents included OppenheimerFunds Inc., Perella Weinberg Capital Management LP and Stairway Capital Advisors, a person representing the group said, asking not to be identified. Also in their camp is Group G Capital Partners LLC, said another person who declined to be named.
After the president’s comments yesterday, Perella said it had agreed to the buyout offer.
Obama’s team had first offered secured lenders $2 billion for their $6.9 billion in loans, and then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion, and Obama’s patience ran out.
“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”
With Chrysler now in bankruptcy, the government will pay secured lenders $2 billion, according to a court filing.
Banks including JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. lent Chrysler $6.9 billion, reselling some of their secured loans at discounts to investors. Chrysler took a $4 billion bailout loan from the U.S. Treasury and was racing to reduce debt to meet a government deadline for more aid, after workers agreed to give up $10 billion in future pension benefits.
Deadline Ignored
While lenders representing 70 percent of the Chrysler loans agreed to Obama’s offer of $2.25 billion in cash, the dissidents ignored a deadline of 6 p.m. on April 29, according to one of the investors who declined to be named.
Many dissidents paid from 50 cents to 70 cents on the dollar for their Chrysler loans, so they’re sitting on losses, according to people familiar with the matter.
Ronald E. Kolka, Chrysler’s chief financial officer, said in a court filing that the first-lien debt is trading at about 15 cents on the dollar in the secondary market.
Chrysler, with about 54,000 employees, listed assets and debt of more than $1 billion in documents filed in U.S. Bankruptcy Court in New York. As of Dec. 31, Chrysler companies had assets of about $39.3 billion and liabilities of $55.2 billion, according to court filings.
Dan Arbess, a partner at New York-based Perella, didn’t return calls seeking comment. John Rijo, principal of Uniondale, New York-based Stairway, and Group G Capital Chairman Geoffrey Gwin declined to comment.
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