Frantic attempts to hammer out a deal with bondholders of $7B of Chrysler’s debt have not yielded any results. Though 70% of bondholders agreed to a debt-for-share or debt-for-cash swap, the last 30% are holdouts and are hoping they might get a better deal in court.

This may seem like a stupid and unrealistic move on their parts, because the poor horse that is Chrysler has been flogged way beyond death, but there is a method to the bondholders’ madness. They are currently being offered $2 billion in cash for the $7 billion in Chrysler debt that they hold.  The bondholders figure they have little to lose because they are insured with credit-default swaps, and would get more money from insurance on the debt, than they would get from agreeing to the restructuring terms.

The bankruptcy proceeding may be Chrysler’s last opportunity to start with a cleaner, if not a clean, slate. Further government assistance is only forthcoming if an agreement with all creditors can be arranged. Otherwise it would amount to a wealth transfer from American tax-payers to, mostly foreign, bond-holders.

http://www.reuters.com/article/ousiv/idUSTRE53S8F620090430

http://www.sun.com/third-party/global/oracle/index.jsp

The Treasury Department has turned down Chrysler Financial’s most recent request for more financial aid. The impasse was the caps on executive compensation that the government wants imposed, to insure the company stays solvent long enough to pay the tax payer back. The latest installment would have added another $750 million, to the $1.5 billion already lent to Chrysler Financial. This is in addition to the $4 Billion lent to the Chrysler parent company.

It seems executive bonuses come first, maybe the exec can lend consumers the money to buy their cars. They expect union members to give up between $30-$40 in pay and benefits, but don’t want to set a good example with their own compensation. Lego my ego….I mean bonus.

 http://www.foxnews.com/story/0,2933,517216,00.html