Archive for April, 2009

Bankruptcy for Chrysler Probably Averted as Banks Agree To Reduce Debt

Chrysler LLC and the U.S. Treasury Dept. have formed a tentative agreement with banks and private equity firms holding $6.9 billion of the automaker’s debt. The entities have agreed to accept $2 billion and a small equity interest in the new company, paving the way for Chrysler to avoid bankruptcy and merge with the Italian automaker Fiat.

The agreement to reduce debt was confirmed by a Treasury official who said: “The agreement from Chrysler’s principal banks is an exceptional accomplishment in line with the President’s firm commitment that all stakeholders sacrifice to make this deal succeed.”

A deal with Fiat is now expected to proceed forward, with the Italian automaker owning 35% of Chrysler, while the United Auto Workers will own up to 55%, and the Federal government up to 10%.

The Chrysler deal with bond holders is significant, not only for Chrysler, but also for GM, since it could be a model for a deal at GM, whose restructuring to avoid bankruptcy is also dependent on debt holders taking an enormous “cram-down” on what they are owed.

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GM on a course to bankruptcy? How to Protect Lemon Law Claims.

Is GM heading for bankruptcy? According to the New York Times, a plan being worked out by the administration, G.M. would file for prearranged bankruptcy. It would then use a sale authorized under Section 363 of the bankruptcy code to quickly sell off the desirable assets to a new company financed by the government. These good pieces might include Cadillac and Chevrolet, as well as assets the company needs to run the business.

Less desirable assets, brands like Hummer and underperforming factories, would be left in the old company. Proceeds from the sales, including stock in the new company, would be given to the old G.M., helping to settle claims.

1-800-MY-LEMON, PA and NJ’s Lemon Law Lawyers, urge the government to include all lemon law buybacks (both pre and post bankruptcy) as well as compensation to consumers for breach of warranty claims for all brands of gm cars, to be included with the new company. Failure to do so, may result in lengthy delays of payment, and or, a reduction of payments to consumers.