Chrysler lenders receive death threats

Date: Tuesday, May 5, 2009
Author: Christine Seib, New York, Timesonline.co.uk

Lenders' lawyer tells hearing that threats were 'perceived to be bonafide' after deal to wipe out Chrysler debt was scuppered.

Lenders that scuppered a deal to wipe out Chrysler’s debt, pushing the struggling auto maker into bankruptcy last Thursday, have received death threats, their attorney told a New York court.

Chrysler, America’s third-biggest car company, was in court for the second day of hearings into its restructuring under Chapter 11 bankruptcy protection.

Tom Lauria of White & Case, the lenders’ lawyer, said that some of the lenders had received death threats "which they perceive to be bonafide".

Oppenheimer Funds, Stairway Capital Management and TCW Group have been publicly identified as members of the rebel fund group.

The car company’s attorneys asked Judge Arthur Gonzalez for a quick hearing into its plan to sell most of its assets so that it can be merged with Fiat, the Italian automaker, and be out of bankruptcy in as little as 30 days.

Chrysler also asked the judge for approval to pay Fiat a $35 million break fee if the merger, in which Fiat would share its fuel-efficiency technology in return for a stake of up to 35 per cent in Chrysler, does not go ahead.

The car company wanted the hearing to be held as quickly as May 21.

But an attorney for some of Chrysler’s smaller lenders immediately objected to the quick sale. Chrysler owes $6.9 billion to about 46 banks and investment funds. Its biggest lenders – JP Morgan Chase, Citigroup, Morgan Stanley and Goldman Sachs – have agreed to accept a pro-rata share of $2 billion in return for wiping out their portion of the debt.

About 20 funds that control around $1 billion of Chrysler’s debt last week refused the $2 billion deal because it treats unsecured lenders, such as the United Auto Workers union, more generously than the funds, which have their debts secured on Chrysler’s assets.

Their objection forced Chrysler to file for Chapter 11 bankruptcy protection, prompting President Barack Obama to blast the funds over their "selfish" demand for more cash.

The death threats are an echo of the threats received by workers at AIG after the insurer was criticised by the President for paying million of dollars in bonuses despite surviving on a $80 billion taxpayer bailout. Some AIG employees were forced to remove their children from school and hire security for their homes as public anger about the bailout boiled over.

Mr Lauria wants the identities of the lenders to be kept secret by the court.

He also said that the lenders had not had sufficient time to read Chrysler’s 300-page restructuring proposal, lodged with the court on Sunday afternoon.

The quick sale was being "orchestrated entirely by Treasury and foisted on the debtors without regard to corporate formalities", Mr Lauria said.

Judge Gonzalez agreed to postpone his decision on the sale of assets until Tuesday afternoon.