| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
 After playing hardball with Chrysler LLC's debtholders, the government took a much lower-key approach in its dealings with General Motors Corp.'s bondholders, particularly as the administration weathered charges that it was throwing out decades of bankruptcy law to get its way in the Chapter 11 filings of the two automakers. In spite of both groups holding out, GM's lenders and creditors haven't felt much of the harsh rhetoric heard as Chrysler slid into Chapter 11, when the hedge funds objecting to the restructuring plan were painted as "speculators" and received the blame for driving Chrysler into bankruptcy. The hedge funds even requested to remain anonymous after the filing as many were receiving death threats. As Eric B. Fisher of law firm Butzel Long writes in The Deal magazine: "The government and other sponsors of Chrysler's plan successfully portrayed the investment firms as Greed Personified, willing to risk thousands of jobs and America's entire manufacturing future in exchange for an enhanced return on their investment of just a few more cents on the dollar. The government trounced the Chrysler holdouts. In a result that some have described as unprecedented, Chrysler's secured lenders, who are supposed to be close to the top of the creditor food chain, were left with just 29 cents on the dollar, while certain unsecured creditors reaped significant rewards ahead of them." That stands in contrast to things at GM, where the unsecured creditors were spared the harsh rhetoric even after bondholders overwhelmingly rejected GM's restructuring plan. The carmaker even sweetened its offer to unsecured debtholders to get more of them on board right before the filing, offering warrants that could increase their share of a restructured GM to 25% from the earlier offer of only 10%. The softer touch appears to be having an effect as GM's bankruptcy proceedings have gone more smoothly since it filed on June 1. The initial proceedings for Chrysler took three days, while GM's were wrapped up in a matter of hours. However, things might not stay so cordial. Bloomberg is reporting that Thomas Lauria, the White & Case LLP attorney that represented Chrysler's dissenting hedge funds and the Indiana pension funds -- Indiana State Teachers' Retirement Fund, Indiana State Police Department Pension Trust and Indiana Major Moves Construction Fund -- is trying to organize some GM bondholders to press their case in that bankruptcy proceeding. And there's bad blood between Lauria and Treasury, as is now being revealed in the Chrysler proceedings. The Deal's Jamie Mason writes: "[in an e-mail] Treasury official, Matt Feldman, characterized Thomas Lauria of White & Case, who previously was counsel to the self-proclaimed 'non-TARP' first-lien lenders before they disbanded on May 8, as a terrorist. Feldman also told [Chrysler's financial adviser, Robert Manzo of Capstone Advisory Group LLC] that he didn't appreciate his involvement since he 'protected Chrysler's management and board.' " (The Deal Pipeline subscribers can read the full story here.) But there are also other reasons why the rhetoric may be toned down. As Lauria told Bloomberg: "The difference with GM is that, whereas the 'bad guys' in Chrysler were hedge funds, who Obama called 'speculators,' here they're Main Street -- individual retirees who bought bonds when they were like gold bullion." While the ad hoc group of bondholders that negotiated with GM was likely made up of large hedge and pension funds, the number of "little guys" is significant, as evidenced by the popping up of advocacy groups representing them, such as the Main Street Bondholders Coalition. However, GM's sweetened deal solved many problems in that regard as its drew entities like Main Street Bondholders in and got them on board with management's restructuring plan. So far, GM's management has been lucky enough to avoid many of the bumps in the road that Fiat SpA faced to get Chrysler, and using the carrot instead of the stick is playing a big part in it. - George White See Dealscape post on claims subordination See Dealscape post on Chrysler's hedge fund investors See Dealscape post on rhetoric for Chrysler holdouts See Deal magazine story on hedge funds in bankruptcy court See The Deal Pipeline story on Chrysler e-mails (subscription required) See Bloomberg story on Tom Lauria See The Deal Pipeline story on Fiat buying Chrysler (subscription required)
 Deal Video
    Community
 Elsewhere on The Deal.comDealwatchThe Deal MagazineCorporate Dealmaker
The Deal VideoCategories
Blog roll
Archives
| |||||||||||||||||||||||||
|
|
|
|
|
©Copyright 2009, The Deal, LLC. All rights reserved. Please send all technical questions, comments or concerns to the Webmaster.
