The principle at stake is the long-standing legal precedent of senior debt holders having first rights to assets of the company that they have lent money to. In the proposed plan, unsecured creditors and union members would jump ahead of the debt holders claims. The debt holder group is divided in it's support of the plan. Those in favor are the large banks (who are receiving TARP and other bailout funds). Those opposed tend to be the smaller hedge funds and private investment firms (which by the way, are investing money for teachers, pension plans retirees and other investors like you and me). Of course, the Obama administration is portraying this group as "speculators who are endangering the future of Chrysler".
Here are the highlights of the plan developed by the Obama administrations auto task force.
- The $4 Billion that we lent them so far is wiped out. Instead, US gets 8% equity ownership
- Current equity shareholders are wiped out, and will have to contribute $600 million to cover pension obligations
- UAW Retiree health care fund is currently owed $10.6 Billion by Chrysler. They will receive a $4.6 Billion promissory note to be paid back (with interest) over the next 13 years. In addition, the UAW gets 55% ownership of the company.
- Pension obligations are untouched
- Amounts owed to suppliers will be repaid over time, with assistance of TARP funds
- Secured/Senior Debtholders would forgive $4.9 Billion of what is owed them. They would end up owning $2 Billion of debt from Chrysler (30 cents on the dollar).
- Fiat gets 20% ownership now and 15% more later, in exchange for giving technology to Chrysler. (Editorial comment: what are the odds that they get the 15% later if they do not produce the kind of eco-cars that the US government wants them to make?).
- U.S. to provide an additional $8 Billion dollars to assist during the transition.
No comments:
Post a Comment