GM and Chrysler negotiating with government to try to avoid forced bankruptcy

[RB TexLa]

Government hires firm that would handle forced bankruptcy of GM and Chrysler.



GM, Chrysler May Get Bankruptcy to Protect U.S. Loans

By Mike Ramsey and Tiffany Kary

Feb. 9 (Bloomberg) -- General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.

U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.

If federal officials fail to get a consensual agreement to change their place in line for repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.

“They are negotiating to see if they can reach an agreement,” said Workman, a bankruptcy lawyer based in Washington. “If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us’” to be first in line for repayment.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ad_m06A_gtLk&refer=home

[jtrockville]

1. GM is negotiating with the Thailand government too... (LINK)

http://www.bloomberg.com/apps/news?pid=20601209&sid=ah9d.Uw5pzTk

[BR_Parkway]

2. How much bailout did Citi, JP and Goldman just get? And now they

might have more claim to money we loaned GM/Chrysler than we do?

I'm not a banker, or a Congressman - but how much freaking common sense do these people not have when it comes to writing rules to go along with the money they are handing out?

There are still some days I wonder if it wouldn't be easier to clean all the parasites out of the system by letting the system collapse and we all just start over.

[Craftsman]

3. Look for them to dump unions and pensions

If they file bankruptcy look for them to do all possible to dump the union and pensions and blame the government for making them do it.

[RB TexLa]

4. I'm not so sure Chrysler makes it out of bankruptcy and it would be a lot easier

for GM to make it out if they can find a global partner or buyer.