Debt Negotiations: JP Morgan Chase and Friends Claim They Found a Pony!

I’ll say this for the Administration. They’re driving a harder bargain on behalf of Chrysler and GM than Hank and Timmeh bargained with AIG (a cynic might say that’s to push both companies towards bankruptcy).

But I’m fascinated by the claims the creditors are making in the case of Chrysler. Where Chrysler estimated its secured creditors could get 25 cents on the dollar (around $1.7 billion; it picked the 25 cents out of the 11 to 43 cent range), and the Administration is offering them the 15 cents on the dollar they can currently get in the market (around $1 billion), the creditors claim they believe they can get 70 cents on the dollar (around $4.75 billion).

Some senior lenders believe they would get more than 70 cents for each dollar of their secured loans if Chrysler is broken up and sold, said people familiar with the talks. Other lenders don’t have an exact number nailed down and are awaiting detailed figures from the auto maker on its assets.

All of the 40-plus lenders and investors are nonetheless incensed by the last Treasury offer: that they accept about 15 cents per dollar of face value of their loans, or roughly $1 billion of the $6.9 billion owed them.

[snip]

But some of the senior secured lenders think that is a low-ball estimate and say recoveries could reach 70 cents on the dollar in liquidation, said another person familiar with the talks.

Gosh. Cerberus has been trying for two years to sell Chrysler, much of that time before the crash drove down the value of Chrysler and wiped out the ability of many potential buyers to do so. Yet these banksters think they’re going to get $4.75 billion off Chrysler’s remains now that the market is really abysmal?

Who knew Chrysler has secretly been a shiny pony all this time?

Or perhaps the creditors are using the 70 cent number for a different reason, and not just to drive an equally hard bargain in response to the Administration. Perhaps that’s what at least some of the creditors know they’ll get in bankruptcy, once you take what they’ll get to sell Chrysler’s pieces parts and get the payoffs of the credit default swaps and other hedges they’ve got on Chrysler. 

Are JP Morgan Chase and friends suggesting they’ve placed a $3 billion bet against American industry?

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21 replies
  1. wavpeac says:

    If they go bankrupt, it keeps the secret for everyone else. The secret is the massive fraud. And yes, I’d say it’s a safe bet that the entire industry is betting against itself on this. (hoping to make back some of their losses and maintain the secret). This b.s has to stop.

  2. NelsonAlgren says:

    Are JP Morgan Chase and friends suggesting they’ve placed a $3 billion bet against American industry?

    Yes. This has been another example of simple answers to simple questions.

  3. scribe says:

    “Some senior lenders believe they would get more than 70 cents for each dollar of their secured loans if Chrysler is broken up and sold, ….”

    That, of course, depends on how much of their tens of billions of profits the Big Oil companies are willing to bid, to buy up and shitcan the Chrylser electric car line. There’s nothing to say that selling that part of the business has to result in electric cars on the street.

    I’ve been saying this for months – the whole push “Chrysler and GM into bankruptcy” thing has been driven by Big Oil (and their minions Bush and Cheney and Snow and Quayle) wanting to guarantee themselves and you, the driving public, an internal combustion future.

    It’s not like it hasn’t been done before. GM bought up, closed, and destroyed almost all the privately-owned municipal bus/trolley systems at the end of WWII, in furtherance of putting America on wheels. GM-made wheels.

    • readerOfTeaLeaves says:

      Makes sense. IMHO, Big Oil is probably also one of the key movers behind the wailing and moaning over the so-called ‘cuts’ in Defense industry items that all use petrol fuels. But as in the past, Big Oil will remain hidden in the background and not held accountable.

      As for:

      Are JP Morgan Chase and friends suggesting they’ve placed a $3 billion bet against American industry?

      Adding my ‘yup’ to that of wavpeac and NelsonAlgren.
      Guess we’d better keep bailing out AIG so that it can pay off those ‘bets’ (i.e., credit default swaps) to whoever gambled that Chrysler and GM would fail.

      Although all insurance policies have expiration dates. Surely, the swap buyers are going to push for things to happen before their ‘credit default’ contracts expire; whereas Geithner and the feds need to stall until after those contracts expire.

      IMHO, there is — or will be — an epic battle behind the scenes in which the gamblers are going to be desperate to force Geithner and Bernanke to ‘resolve’ this before those contracts expire. I expect the hysteria to increase short term as this panic builds among the gamblers.

    • NorskeFlamethrower says:

      Citizen scribe:

      Are you sure that the forced bankruptcy that Obama and his folks are threatenin’ doesn’t give the feds a lotta leverage over how the remainin assets are disposed and/or the corporation reorganized?

      I’m not certain that the bondholders really have any leverage here.

  4. Teddy Partridge says:

    Having hedged Bear Stearns into the ground, Chrysler should be really easy.

    These douchebags just can’t help themselves. They need to be at sea on their yachts in the Gulf of Aden — let them meet some real pirates face-to-face.

  5. OrganicGeorge says:

    I’m sure the banks are carrying the Chrysler loans at $0.70 for the sake of their balance sheet. Yet another way to pass the stress test.

    The economist Schumpeter wrote 40 years ago that corporations were not good citizens, since their first obligation was to their shareholders. Since some of the biggest shareholders are usually the CEO’s, it’s easy to understand why they do, what they do.

    This is the best case for nationalization of the banks. Remove the greedy, so we can save jobs.

  6. oldtree says:

    Will the practitioners that unravel the human psyche please comment? The bankers, and or statements thereof, reliance on fantasy seems overwhelming. The conditioning appears to rival the German people’s feigned ignorance of the systematic slaughter of humans during the war, and even after they were shown proof of their involvement and knowledge. There has to be a “Everyone else does it?” defense coming soon to a theater near us. There appears to be no end to statements known to be lies, dressed up like a dead thanksgiving pig for American consumption.
    Bankers live in a world that is devoid of something that the rest of us must deal with.

    • NorskeFlamethrower says:

      Citizen foothillsmike:

      Bingo…that’s my question too… the geniuses in the Obama Treasury Dept think they’ve got some leverage in court because of the amount of federal bucks already invested in the company.

  7. barbara says:

    Who knew Chrysler has secretly been a shiny pony all this time?

    Well, they’re cutting edge trendwise, hadn’t you heard? They’re bringing out a shiny new SUV to accompany its fave Jeep Cherokee (20 mpg). Clearly they know something the rest of us don’t! /s

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  9. bobschacht says:

    EW–
    Late driveby syntax clean-up alert:

    Perhaps that’s what at least some of the creditors know they’ll get in bankruptcy, once you take what they’ll get to sell Chrysler’s pieces parts and get they their? payoffs of off? the credit default swaps and other hedges they’ve got on Chrysler.

    Please clarify.
    Bob in HI

  10. hazmaq says:

    Hey, Ed Schultz just pointed to a direction our conversations should aim for:

    Why arent the Right and those “I’m not a Republican my ass”- centrist Dems slamming the banks to lend more to those credit worthy millionaire farmers and business pals of theirs, instead of slamming the Prez and those Progressives giving him the Prez some temporary leeway.

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