by Sundeep Kothari
Atlanta, Georgia Debt Help Attorney
Report: Chrysler expected to file for Chapter 11 protection
From the article:
Auto industry, will file for bankruptcy today after last-minute negotiations between the government and the automaker’s creditors broke down last night, an Obama administration official said.
U.S. officials had offered Chrysler’s secured lenders $2.25 billion in cash if they would agree to writedown the $6.9 in secured debt that the company owed. But a small group of hedge funds refused the 11th-hour deal, forcing an imminent bankruptcy.
An administration official this morning expressed disappointment, saying the holdouts had failed to “do the right thing,” but that “their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders, nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward.”
President Obama is scheduled to address the issue at noon today at the White House.
As talks broke down late last night, it became near certainty that the Obama administration would send Chrysler into bankruptcy under a plan that would replace chief executive Robert L. Nardelli and pump billions of dollars more into the effort, all in hopes that the company could emerge from court proceedings as a re-energized competitor in the global economy.
When Lehman Brothers was allowed to go into bankruptcy, the stock market soon-after went into free fall, and the economy hasn’t recovered since.
Will the same thing happen now? Or will the economy stay about where it is?
No one really knows. This is kind of a test against the idea that some companies are simply too big to fail.
Lots of jobs are going to be lost through this bankruptcy, not simply at Chrysler but for dealers, suppliers, and more.
And no one is certain that Chrysler can emerge from a Chapter 11 bankruptcy, rather than end up getting liquidated, the way Circuit City went into bankruptcy thinking it could emerge but eventually shutting down completely.
