Yes, I’m late to this, but I didn’t have time to dig beyond the headline of “Chrysler repays $1.9 billion of its TARP loan” before now. As you can tell by my headline, it wasn’t UAW Motors that repaid it.
Let’s walk back to what went out the door to the Chrysler-related companies run by Cerebus before and during its bankruptcy:
- $4 billion went to Chrysler on 1/2/2009 ($500 million assumed by UAW Motors)
- $1.5 billion went to Chrysler Financial on 1/16/2009 (repaid before bankruptcy exit)
- $280 million went to Chrysler for warranty obligations on 4/29/2009 (repaid before bankruptcy exit)
- $1.89 billion in used Debtor-In-Possession financing went to Chrysler in May
In its write-up of the repayment, The Detroit News mentioned something about the original $4 billion loan I had not known before – the Bush administration placed a $2 billion lien on Chrysler Financial. That lien formed the basis of the continuing claim on the greater of $1.375 billion or 40% of Chrysler Financial’s distributions to the Cerebus subsidiary that was the parent Chrysler Holding company (incorrectly reported earlier as 40% of equity in Chrysler Financial) as it wound down following the Obama administration’s decree that GMAC and not Chrysler Financial handle loans for Chrysler vehicles.
I’ll pick up with the Treasury Department press release (which also offered the correction on the “40%”). Old Chrysler was liquidated on April 30, with, as expected, no repayment of the $5.4 billion debt retained by the company. The $1.9 billion in DIP financing was extinguished at that point, with some small unspecified claims from the sale of certain assets retained by the Treasury. That left only the Chrysler Financial claim to repay at least part of the TARP loan.
Cerebus ultimately coughed up $1.9 billion of that. The Detroit News quoted a Treasury spokesperson as saying that the payment came from “both distributions from Chrysler Financial and contributions from its equity owners”. That was sufficient to satisfy the remaining claim on Chrysler Financial, probably because it was more than the $1.375 billion “floor”, even though it was less than the $2 billion lien the Bush administration put on Chrysler Financial and Chrysler Financial isn’t quite fully wound down.
The remaining $2.1 billion of the TARP loan, as well as the $1.9 billion DIP financing, has thus been written off. Combined with the $7.1 billion UAW Motors still owes the federal government, with the first payments scheduled to begin next year, that leaves $11.1 billion still out there. Given Chrysler’s continuing sliding market share, I somehow doubt the Treasury will get $7.1 billion in payments or $4 billion for their 8%-9.85% equity stake.
