The Obama administration and its car-czar group appear to be intent on teaching someone who got in their way a brutal lesson.
Secured creditors' claims stayed in the "Old Chrysler," which was stripped of most of its value.
The ownership structure of "New Chrysler" that emerged turned out to be the following, according to this September 4 Bloomberg report -- U.S. Government -- 9.85%; Fiat Motors -- 20%; Canadian government -- 2.46%; the UAW's health care trust -- 67.69%.
Secured creditors have no stake in "New Chrysler."
"Old Chrysler" is still in bankruptcy, and in the process of liquidating. The proceeds from that liquidation, up to $2 billion, are supposed to go to the secured lenders first. But guess what? The same Bloomberg article by Linda Sandler and Erik Larson referenced earlier tells us that the government apparently now wants the $3-billion plus in bankruptcy financing back:
“Having stripped Chrysler’s first lien lenders of $5 billion in connection with the sham sale of Chrysler’s assets to a shell corporation, Treasury is now trying to make it difficult for the lenders to recover any of their losses from the scraps that were left behind,”
It's hard to see how anyone knowing the facts and sordid circumstances of the Chrysler bankruptcy and its aftermath can argue against how columnist Michael Barone accurately characterized as "an episode of Gangster Government" in early May.
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MONDAY, MAY 11, 2009
Gangster government gives Chrysler to UAW
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