Group drops fight against Chrysler plan
The small but staunch group of lenders who stood against the government-orchestrated sale of Chrysler will withdraw their public opposition after two of the group’s largest remaining members dropped out, people familiar with the matter said Friday.
The group was forced to drop its battle after OppenheimerFunds, the New York-based asset manager, and Stairway Capital, a hedge fund on New York’s Long Island, who were leading the effort, determined that the shrinking group was no longer large enough to be effective in court and withdrew, the sources said.
The group, which called itself the non-TARP lenders group to highlight the fact that its members had not received aid from the federal Troubled Asset Relief Program, had grown noticeably smaller since last week. Then, the group said it represented 20 financial firms holding about $1 billion of Chrysler’s $6.9 billion in senior secured loans.
The lenders group was sharply criticized last week by President Obama, who blamed its members for forcing the third-largest U.S. automaker into bankruptcy. Obama characterized the group as “speculators” who were fishing for “an unjustified taxpayer-funded bailout.”
The group contends that the sale of Chrysler illegally forces senior creditors to accept less money than junior creditors. Chrysler filed for bankruptcy April 30 after some of the senior creditors declined the government’s offer of 33 cents on the dollar for their loans. The majority of the lenders who hold Chrysler’s senior loans, including four large banks, had agreed to the deal.
Perella Weinberg Partners, an elite boutique investment bank in New York, was the first major lender to withdraw from the holdout lenders group. By Wednesday, the group revealed in a court filing that its number had dwindled to five, collectively holding just $295 million of the debt.
Stairway and Oppenheimer held a majority of the remaining stake, a person familiar with the matter said. The other members remaining were three hedge funds: Schultze Asset Management, Group G Capital Partners and Foxhill Capital Partners.
“After a great deal of soul searching, the group just doesn’t have enough critical mass to withstand the kind of pressure we’ve seen and be able to continue the fight,” Geoffrey Gwin, principal of Group G Capital Partners, said Friday. “Everyone in the group I know of is still objecting and refusing to sign the consent to what they’re doing. But I don’t think we’re going to be objecting anymore in the case itself.”
Chrysler is in the process of seeking approval from a U.S. Bankruptcy Court judge to sell itself to a new entity jointly owned by Fiat, the United Auto Workers and the U.S. and Canadian governments.
