WASHINGTON -- A dissident group of Chrysler LLC lenders that has been challenging the carmakers proposed merger with Fiat S.p.A. is disbanding after two of its five members withdrew, a lawyer for the group said.
It reached a point where we didnt have a significant enough group, and it wasnt sensible to proceed, Glenn Kurtz, a lawyer with White & Case in New York, said in a phone interview.
OppenheimerFunds and Stairway Capital Management pulled out today, leaving the group with just three fund owners and less than 2.8 percent of Chryslers $6.9 billion in senior debt.
The move paves the way for Chrysler to complete its planned swift, surgical Chapter 11 bankruptcy reorganization.
"This removes the last major hurdle for the Fiat merger and for getting in and out of bankruptcy within 60 days of filing," said George Magliano, director of North American auto research for IHS Global Insight in New York. "It's an amazing success for the Obama administration."
White House spokesman Robert Gibbs called the development "another important and promising step in Chrysler's favor to go through a very quick restructuring and bankruptcy and to very quickly have Chrysler and Fiat emerge together as partners to put a very storied automobile company back on a path toward viability."
In a statement released from its headquarters, Chrysler said:
We are pleased with the decision by the minority secured lenders to withdraw their opposition to Chryslers proposed sale to Fiat," Chrysler said in a statement. "We believe this is in the best interests of all of Chryslers stakeholders.
4 large banks
Most of Chryslers debt is held by four large banks -- JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley -- that have agreed to the Obama administrations debt-restructuring plan.
The large banks had agreed to the administrations offer of a $2 billion cash payment in return for forgiveness of the $6.9 billion debt, or 29 cents on the dollar.
Oppenheimer said last week that it rejected the governments offer because as a senior holder of secured Chrysler debt it was entitled under U.S. bankruptcy law to more than was being offered to unsecured creditors. Chrysler filed for court protection on April 30.
The dissident group said last week it comprised 20 members holding $1 billion of Chrysler debt.
Fear of disclosure
Those numbers shrank once U.S. Bankruptcy Judge Arthur Gonzalez ruled this week that the group would have to disclose its members, many of whom are hedge funds that prefer to operate privately.
The group disclosed on Wednesday said it had five fund owners holding $295 million Chrysler debt.
Oppenheimer, a unit of Massachusetts Mutual Life Insurance Co., had two funds with a total of $100 million in Chrysler debt that were in the group. The funds were Oppenheimer Senior Floating Rate Fund and Oppenheimer Master Loan Fund LLC.
With only five creditors, it is difficult to significantly influence the outcome of the bankruptcy process, Oppenheimer spokesman Bruce Dunbar said in an today.
Oppenheimer said in a statement that the dissident lenders could no longer reasonably expect to increase the recovery rate on the debt they hold by opposing the restructuring plan.
The other three remaining members were Schultze Asset Management, Group G Capital Partners and Foxhill Opportunity Master Fund.
Other "tangential" issues still must be dealt with in bankruptcy court, but they won't hold up the Fiat merger, said Douglas Bernstein, a lawyer with Plunkett Cooney in suburban Detroit, who has practiced bankruptcy law for 27 years.
He said the most significant of these issues are dealer reductions and supplier disputes.