Valid Points Didn't Save Chrysler Non-TARP Lenders

In the rush to get Chrysler sold off to Fiat, Chrysler’s dissenting lenders were run over by a bus, but first they raised a couple of good points.

Leaving aside the question whether the dissenters got a fair offer for their portion of Chrysler’s debt, they questioned the fairness of the government’s role in brokering a deal with Chrysler’s other lenders. They also complained that Chrysler’s sale to Fiat is hardly an impartial auction to the highest bidder.

What they learned was, you can’t fight City Hall. The group gave up late last week.

While it lasted, the dissenting group picked an inspired name for themselves: “Chrysler’s Non-TARP Lenders.” Right off, that says a lot about the group’s public posture. TARP is the Troubled Asset Relief Program of the U.S. Treasury Department, better known as the $700 billion bailout fund for the financial industry, which has also been employed to bail out Chrysler and General Motors.

Chrysler’s biggest lenders, such as JPMorgan Chase, Citigroup and others caved in early in the process and accepted an offer brokered by the Treasury Department to accept only a portion of the face value of their Chrysler debt. Of a total of $6.9 billion in debt, this group initially represented about 70 percent.

The non-TARP lenders were quick to point out that these megabanks were subject to arm-twisting by Treasury because the big banks were also big-time recipients of TARP funds.

“None of us have taken a dime in TARP money,” the non-TARP group said in an April 30 letter. The non-TARP group initially said it included 20 organizations representing about $1 billion in debt.

Meanwhile, President Obama in a press conference labeled the group as “speculators,” whose refusal to play ball forced Chrysler into bankruptcy. At the time, I wrote in this space that Obama was throwing the dissenting lenders under the bus of public opinion.

That’s just what happened. Within days, according to a May 6 court document, the non-TARP group dwindled to nine organizations representing $295 million in Chrysler debt. The group was so afraid of a public backlash that its members unsuccessfully asked the court to remain anonymous.

That raises another major point for the non-TARP group, which in their view was that the ways were greased for Chrysler’s sale to Fiat and only Fiat, as opposed to a “good faith” effort to sell Chrysler to the highest bidder.

Separately, Chrysler disclosed in court documents that it already pursued merger talks with  Nissan, GM, Volkswagen, Tata Motors of India, Magna of Canada, GAZ of Russia, Hyundai, Honda, Toyota and others, and found no takers.

The Fiat deal gained even more momentum on May 12, as Chrysler submitted court documents spelling out the details the sale of its assets to the newly restructured Chrysler-Fiat merger.

Why the rush? Chrysler said in a May 8 statement: “Given the stress on all aspects of the automotive industry and the current idling of Chrysler’s manufacturing facilities … key relationships with suppliers, dealers, and other business partners cannot be preserved if the sale process is not concluded quickly.”

Photo: Fiat Group