Obama Criticizes Chrysler Lenders, Hedge Funds That ‘Held Out’

[Joanne98]

By Julianna Goldman

April 30 (Bloomberg) -- President Barack Obama criticized Chrysler LLC lenders including hedge funds and other financial institutions that turned down administration loan-reduction proposals, forcing the automaker into bankruptcy.

“I don’t stand with those who held out when everyone else is making sacrifices,” Obama said today in Washington where he announced that Chrysler would proceed with a Chapter 11 bankruptcy filing to reorganize into a more viable carmaker in a partnership with Italy’s Fiat SpA.

Obama said that while many of the stakeholders worked constructively, others did not. “In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” he said.

“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”

A dissident group of 20 investment firms and other lenders turned down administration loan reduction proposals, leading to a breakdown in talks last night. The firms include OppenheimerFunds Inc., Perella Weinberg Capital Management LP and Stairway Capital Advisors, a person representing the group said, asking not to be identified. The companies were part of a steering group that led Chrysler restructuring negotiations with the Treasury Department.

Dan Arbess, a spokesman for New York-based Perella, didn’t return calls for comment. Jack Brown, a spokesman for New York- based Oppenheimer, declined to comment. Stairway spokesman John Rijo said the Uniondale, New York-based fund would be issuing a statement later today.

Counteroffer

The group made a counteroffer of $2.5 billion late yesterday, said a representative of one of the funds, who asked not to be identified because the talks were confidential.

In bankruptcy, the majority of the lenders who approved the $2.25 billion plan could force the minority to accept a payout similar to the rejected deal. The dissidents plan to object to the company bankruptcy plan to put its best assets into a new entity, said a person familiar with their thinking.

Obama’s language echoed a senior administration official who earlier today rejected complaints from the lenders that they weren’t treated fairly. Every lender had the opportunity to participate and every lender was communicated with directly, said the official, who spoke on the condition of anonymity.

Even if they object to the bankruptcy plan in court, the official was confident that the judge wouldn’t override the support of the other lenders, who hold 70 percent of the loan.

‘Vultures’

The objections from the group of lenders also drew criticism from Michigan lawmakers, including Democratic Representatives John Dingell and Sander Levin.

“The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury, firms I label as the ‘vultures,’ will now be dealt with accordingly in court,” Dingell said.

“It is outrageous that a handful of hedge funds and other creditors have refused to join all the other stakeholders in participating in the restructuring necessary to pave the way for a Chrysler-Fiat alliance,” said Levin.

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

[wuvuj]

1. Hedge funds and private investment firms....

...will soon be regulated? Maybe about as well as the banks are???????????