30 April 2009, 09:26  Chrysler brinkmanship continues

The Chrysler brinkmanship continues, with some small hedge funds acting of extracting yet more concessions from the government, as the bankruptcy deadline looms. The reason the funds can play such hardball is that the Administration does not want to BK Chrysler. Despite all the cheery assertions of a speedy bankruptcy, there is no assurance that would indeed come to pass. Even in prepaks, where the creditors have a an arrangement they want a judge to bless. the process can become protracted. And a Chapter 11 filing with no creditor deal runs the risk of loss of customers as uncertainty hangs over the manufacturer, and a Chapter 11 could morph into a liquidation, with not only big job losses, but damage to significant suppliers who in turn may fail, causing problems for other US automakers and transplants. Barring an agreement, which looked increasingly difficult, Chrysler was expected to seek Chapter 11 protection on Thursday, most likely in New York, these people said. The automaker, which is in talks with the Italian automaker Fiat, would file for bankruptcy first. It subsequently would present an agreement with Fiat to the court for approval, possibly on Monday, these people said. They requested anonymity because they were not authorized to speak for the government. A bankruptcy filing by Chrysler would be the first by one of Detroit’s three auto companies amid a devastating slump, and could serve as a preview of what a filing by General Motors might look like. G.M., which like Chrysler received federal assistance last year, faces a June 1 deadline for its own restructuring.

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