Chrysler Meets Bankruptcy - The Reality Show... And We're Just Getting Started!
So it's been SIX whole days (counting the Petition Date) now that Chrysler LLC has been in Chapter 11 bankruptcy, there's been two hearings before the bankruptcy judge, and even Chrysler isn't claiming anything of any true lasting importance has been determined so far. Its latest press release spills as much ink describing the company as it does trumpheting the interim approval by the Bankruptcy Court of DIP (aka debtor-in-possession) financing and permission to use "cash collateral" (i.e. proceeds from collection of accounts receivable and disposition of other collateral) And as bankruptcy insiders know, if you don't get these pretty quick after you file, the case will soon be DOA.
Center Stage - The 363 Motion
The 363 Sale Motion, a 250 page submission in total, was filed the evening of Sunday, May 2. For an excellent concise summary of the contemplated timeline (surprise!! it's more than two weeks!) and transactions encompassed in the proposed sale, visit "Chrysler Seeks the ultimate 363 Sale as the Treasury Department Dictates the Pace" posted by Stephen Sathers at his A Texas Bankruptcy Lawyer's Blog
Even the Motion's title sounds like there's a lot to do. Leaving off the begining part referencing a bunch of Bankruptcy Code and Bankruptcy Rules, the Motion indicates that it seeks
(i) AN ORDER (A) APPROVING BIDDING PROCEDURES AND BIDDER PROTECTIONS FOR THE SALE OF ALL OF THE DEBTORS' ASSETS AND (B) SCHEDULING A FINAL SALE HEARING AND APPROVING THE FORM AND MANNER OF NOTICE THEREOF; AND (II) AN ORDER (A) AUTHORIZING THE SALE OF SUBSTANTIALLY ALL OF THE DEBTOR'S' ASSETS, FREE AND CLEAR OF LIENS, CLAIMS, INTERESTS AND ENCUMBRANCES, (b) AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES IN CONNECTION THEREWITH AND RELATED PROCEDURES, AND (C) GRANTING CERTAIN RELATED RELIEF
- The Summary of the transaction (well, really transactionS, plural), found beginning at the bottom of page 25, is 6 1/2 pages alone.
- The Motion itself is 52 pages
- The Purchase Agreement, attached as an exhibit, is nearly 100 pages long, even excluding the multiple signature pages, and that DOES NOT include any exhibits to the Purchase Agreement
- The proposed Bidding Procedure Order is more than 25 pages, not counting various forms of proposed notices
- And then there's the additional 35-page supporting Memorandum of Law
And Trying to Steal the Scene, the Objections....
>>>>> so with all that, it's probably not too surprising that a few Objections to the proposed sale and otherwise have been filed. Many fall back on the old chestnuts that bankruptcy lawyers always bring out in these situations and which to me seem particularly apt for the current circumstances - namely:
- due process requires that we be given more time to figure out what's been proposed and figure out whether we like it and if not, why
- things are just moving too fast
- we're going to need more time to get organized here
- the debtor has stacked the proposed bidding procedures to favor the initial "stalking horse" , thereby making it exceedingly and unreasonably difficult for anyone else to participate
The Biggie by the NonTARP Lenders. The earliest and most interesting (in the sense that this is one to watch) objection to the bidding procedures and proposed 363 sale are the pleadings filed by a group calling itself the Non-TARP Lenders (would that be a good name for a band? I'm thinking that just "TARP Lenders" sounds like it has more promise). These include the initial "preliminary" objection filed May 4, followed by a "First Supplemental" objection filed today. in addition to making the sort of objections referenced above - which i really do think have lots of merit in this case -- the objections also contend that because of the number and complexity of actions and transactions involved, Chrysler is impermissibly trying to get what is really a "disguised" 'sub rosa plan of reorganization approved .
This is an important objection and basically complains that Chrysler is trying to do a comprehensive plan of reorganization without complying with the procedures and protections for creditors which would usually accompany that process. And while it's not specifically mentioned, that absolutely WOULD slow things down given that there are statutory minimum 25 day periods for circulation of a "Disclosure Statement" as well as mandatory hearings that would almost certainly be fierce brawls. WATCH THIS ISSUE as a ruling on it could completely transform the Chapter 11 process for even the most humble and ordinary Chapter 11 out here in the fly-over states those of us who live here call the Midwest.
Other Objections to Sale. There are also some objections by vendors (click here for one of them) focusing on on the part of the propsed sale where supply contracts with them are to be sold to Fiat or whoever the successful purchaser is. According to these objections, the new purchaser would have up to 90 days to decide whether to assume of reject the contract, but the supplier would still be obligated to deliver goods during this period. There's also one by Plast-o-Foam whcih appears to deal with reclamation claims with respect to goods recently supplied to Chrysler, but not paid for.
Objections Apropo of Nothing. Then there's a new objection today by Chrysler Financial Services Americas LLC regarding the part of the deal where Chrysler wants to enter into a financing arrangement with GMAC Master Financial Services. According to the Objection, Debtor Chrysler won't show them the Term Sheet even thought they would be directly affected. Sounds like the sort of thing any sensible debtor would not want to be distracted by.
And now, quite literally in the last hour or so while I've been writing this post, a Motion for Adequate Protection by CSX Transportation , Inc., a rail carrier concerned about its status, has been filed The Motion seeks adequate protection for its "common carrier" lien which it alleges can prime security interests.
>>>>>>> These are only the highlights in the last couple of days. And, really, the bankruptcy process and players aren't even warmed up yet. Everyone's in for a heckuva a rollercoaster of a ride!
