|$4.0 billion Pre-Filing Loan from the U.S. Treasury in January 2009
$4.5 billion DIP Loan from the U.S. Treasury
Sale of “Good” assets to Fiat
A historic decline in auto sales in 2008, driven by high gas prices and a lack of dealer and consumer credit, resulted in a severe cash drain at Chrysler, LLC (“Chrysler” or the ”Company”). Without additional liquidity, Chrysler would run out of cash by January 2009.
- Chrysler engaged Capstone in November 2008 to assist the Company through the restructuring process.
- Chrysler successfully obtained a $4 billion loan from the U.S. Treasury in January 2009 and submitted its viability plan in February 2009 as required under the loan agreement.
- On March 30, 2009, the President’s Task Force on the Auto Industry concluded that Chrysler could only succeed through a partnership with another auto company, and gave Chrysler 30 days to reach such an agreement. The President also stated that utilization of the bankruptcy code may present the best chance for a successful restructuring.
- Chrysler reached agreement for a partnership with Fiat SpA and filed for Chapter 11 bankruptcy protection on April 30, 2009.
- Chrysler completed the sale of its “good” assets to a Fiat-controlled, U.S. Treasury-financed entity on June 10, 2009.
- Old Carco, LLC, the bankrupt entity holding the “bad” Chrysler assets, filed its Plan of Liquidation on December 15, 2009.
Capstone professionals provided the following key services:
- Reviewed and analyzed Chrysler’s business, operating and financial projections and advised and assisted the Company in analyzing projections related to liquidity and borrowing needs.
- Worked with management to formulate Chrysler’s presentations to the U.S. Congress, in November and December 2008, requesting emergency funding and to develop the Company’s viability plan, including three options:
- A stand-alone plan
- A Fiat alliance plan
- A plan for an orderly wind down in bankruptcy.
- Assisted and managed the development of information and projections required for negotiations with the U.S. Treasury regarding financial support, and led the negotiations of the terms for: the $4 billion Loan and Security Agreement entered into on January 2, 2009; the $4.5 billion Debtor-In-Possession Facility; and the $6.6 billion in new financing extended to New Chrysler.
- Worked closely with counsel to prepare first day motions, declarations and affidavits.
- Assisted in the negotiation of the sale of assets to Fiat
- Assisted in the negotiation of new labor agreement with the UAW
- Worked with local management to develop and implement plans to ensure adequate liquidity for Chrysler’s Canadian and Mexican operations during the U.S. bankruptcy proceedings, and helped develop and implement domestic cash management procedures to ensure compliance with related bankruptcy code provisions.
- Oversaw the Company’s cash management process and led daily cash disbursement meetings with senior operating and finance executives. Assumed key roles in the implementation of Chrysler’s portion of the U.S. Treasury’s $5 billion Supplier Program (to act as insurance for OEM receivables) and Warranty Program (which provided bankruptcy remote funds to cover warranties on vehicles sold during the restructuring period).
- Provided expert testimony in Bankruptcy Court on the viability of Chrysler’s proposed alliance with Fiat SpA, the recovery of creditors under a hypothetical liquidation of Chrysler’s assets and the need for, and availability of, DIP financing.
- Assisted in the preparation of the Company’s schedules of Assets and Liabilities and Statements of Financial Affairs.
Upon the sale of “good” assets to New Chrysler, Capstone has led all aspects of the liquidation and wind-down of Old Carco, LLC, including:
- Formulated the Plan of Liquidation
- Developed asset management and disposition plans
- Conducted competitive sales processes for remaining assets and negotiated asset sales
- Oversaw the liquidation of entities
- Managed treasury operations and cash reserves, which in June 2009 exceeded $300 million
- Prepared and filed Federal and State tax returns
- Managed document and electronic data retention
- Prepared quarterly reports required by the US Trustee
- Resolved priority, administrative and secured claims filed by various creditor parties including taxing authorities
- Managed distributions to creditors