No Runny Eggs

(H/T – Brian)

I know I’m playing catch-up because I still have essentially no energy (no, it’s not the swine flu, or any other flu; it’s the start of Allergy Season), but CNN reported yesterday that the $4 billion bridge loan from TARP, the $300 million fee on that loan, and the $3.2 billion in bankruptcy financing provided to Chrysler UAW Motors will not be paid back, though the Treasury might be getting a portion of the liquidation of Chrysler Financial. Let’s see – that’s $7.5 billion for 8% of UAW Motors/”New Chrysler”. Brilliant!

The CNN story does note that the $4.7 billion in taxpayer funds that will go to “New Chrysler” upon it emerging from bankruptcy, as well as an additional $1.5 billion likely to be loaned to it in mid-2010, will be of the secured credit variety, and will be expected to be paid back.

One more item to consider – the 55% stake the UAW would hold in “New Chrysler” is expected to be turned into cash sooner rather than later. That is supposedly valued at $4.2 billion, with apparently no shareholder voting rights beyond a single seat on the board of directors. One of the many bankruptcy documents states that Fiat will be able to get 40% of that. Somehow, I doubt they’ll pay $1.68 billion (40% of $4.2 billion) for that non-voting share, or any entity other than your federal government will come up with the $2.52 billion for the other 60% (or that plus the shortfall between Fiat’s offer and the $1.68 billion) to make the UAW whole.

As a side note; none of the bankruptcy filings appear to address who initially holds the 15% interest in “New Chrysler” that Fiat can “earn” by meeting three metrics (in 5-percent chunks): introducing a 40-mpg Chrysler made in the US, creating a “fuel-efficient” engine family made in the US, and opening up Fiat’s worldwide distribution network to the Chrysler brand. They do note, however, that separate of the Fiat-UAW VEBA buyout agreement mentioned above, Fiat can increase its total stake in “New Chrysler” to 51%, apparently by an issuance of addtional shares.

Revisons/extensions (8:04 pm 5/7/2009) – (H/T – Jim Geraghty) ProPublica reminds us that $1.5 billion went down the black hole known as Chrysler Finance, which will not be part of “New Chrysler”. That puts the grand total between $9 billion and $9.2 billion (depending on whose numbers for what got sent down the black hole so far one believes).

One bit of a positive – I do expect a rather high dividend to be paid on the government/UAW shares, even higher than what is normally paid on non-voting shares. Still, I expect a very poor rate of return on that $9 billion wasted on Chrysler, even if they don’t ultimately go Tango Uniform.