The organized lender opposition to Chrysler’s bankruptcy petition collapsed yesterday, paving the way for a quick restructuring for Chrysler, and a very fast exit from bankruptcy for the new company. The senior secured creditors had taken a legal hit with the bankruptcy court judge refusing to stop the sale of Chrysler assets to the “new Chrysler” controlled by Fiat and the UAW. Two of the larger creditors dropped out of the group, and the small size of the remainder made further legal fighting a very daunting task. It is an impressive win for the Obama Administration, and certainly has to sober up the creditor group over at G.M. The Obama Administration will get the major restructuring of the domestic auto business they have fought for. They now own the problem.
And for those that may remind me that I questioned whether Chrysler could get a bankruptcy done this quickly I say “guilty”. I did not expect the creditor group to be crushed as easily as they were. Wrong again! Below is the press release from one of the Chrysler senior secured lenders.
STAIRWAY CAPITAL MANAGEMENT L.P.
Official Press Release – 9:45am EDT – May 8, 2009
Subject – Chrysler
Stairway Capital Management (“Stairway”) has decided, after countless discussions with its investors, to actively withdraw from the Chrysler bankruptcy process.
We withdraw with the knowledge that we acted in good faith. We have fought for what we believe should be fair and equitable treatment under contract and bankruptcy law – in accordance with what traditionally occurs in a restructuring process. We remain steadfast in our view that there should be significantly more value attained, given a normal course bankruptcy negotiation. The fact simply is, however, our group has become too small to have a voice within the bankruptcy.
As American taxpayers, we appreciate the unprecedented efforts taken by the current Administration to stabilize the economy and the auto sector; but as fiduciaries to our investors we take exception to being compelled, as Chrysler senior secured lenders, to unfairly shoulder the burden relative to various junior creditors.
Finally, we would like to clarify some speculation about Stairway. We are not engaged in the business of underwriting or holding derivative contracts; we do not employ leverage in connection with our investments; and we have never been involved in the subprime mortgage market, at any level or context. Rather, Stairway is just a small private equity firm specializing in special situations and distressed debt opportunities.