What About Chrysler's Actual Creditors?


Instapundit Glenn Reynolds directs our attention to a pending lawsuit against the Chrysler bankruptcy. It's spearheaded by "holdout creditors" who hold about $1 billion of the carmaker's secured debt and who refused an earlier gov't-backed deal to accept about 33 cents on the dollar for their investment. Obama has blamed these guys for the bankruptcy kicking in.

The holdout lenders will challenge the planned sale of Chrysler's prime assets to a new company controlled by the auto workers union and Fiat, according to Reuters. The lenders say the sale is an "end run" around established bankruptcy law that gives secured lenders priority over junior lenders (including the union) when it comes to getting repaid.

More here.

From a Reuters account:

The dissident group of about 20 lenders, holding about $1 billion in Chrysler debt, said in a statement earlier on Thursday that they had been "systematically precluded" from negotiations with the government. They say they have not taken TARP funds, while the four main Chrysler banks have received about $90 billion in funds from the government's bailout program.

Audio with the lawyer for the group here.

Update: Arguably the most interesting dimension to the story is the way the Obama White House is openly working the P.R. ropes against foot-draggers in this process. More on that here.