One on One with Thomas Lauria, Bankruptcy Attorney with White & Case
Friday, May 08, 2009SUSIE GHARIB: Chrysler's dissident lenders abandoned their fight today as their ranks dwindled and political and financial costs rose. The move clears the way for Chrysler to emerge from bankruptcy quickly and join Fiat. The so-called "non-TARP" lenders had opposed Chrysler's restructuring plan, saying it put non-secured creditors like the United Auto Workers ahead of secured creditors. Washington bureau chief Darren Gersh spoke with the attorney representing that lender group. Darren began by asking Thomas Lauria why they gave up on the case.
THOMAS LAURIA, BANKRUPTCY ATTORNEY, WHITE & CASE: Well, they still believe in the underlying legal and financial principles that motivated them to get started. But the political pressure was just too great for a sufficient number of them to feel comfortable proceeding. And when we got down to the small group that was prepared to put themselves in the bright light of the public eye and bear all of that pressure themselves, I think they just concluded they were too small a group to be credible and too small a group to carry the weight.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: I just want to ask you, it seems like if the government wasn't willing to pump billions of dollars into Chrysler, it wouldn't be worth much even if you liquidated the company. Aren't your clients lucky to get the $0.30 on the dollar that the government was offering them?
LAURIA: Well, a lot of people have looked at the liquidation value of Chrysler and I think there's room for a lot of disagreement on that. One of the questions is if you're going to liquidate Chrysler, do you really liquidate it, selling sticks and bricks or do you sell off business lines and I think a lot of people think that the Ram truck, the Jeep and the minivan line were pretty valuable as operating businesses.
GERSH: Is this a case though where the law may have been on your side but all the facts weren't, that there just were too many -- you were against the government, the unions. Everybody seemed to want to get a deal done and there were just a few people holding out?
LAURIA: It was a case where certainly the circumstances were against us. And certainly there were strong political interests against us. I think the question that this reorganization raises though is are there any circumstances where we're comfortable compromising the rule of law in the interest of political interests? I think that's a very difficult question.
GERSH: It's a difficult question and I imagine a lot of people who are going to be involved in the GM's potential bankruptcy are asking that very question about what this means for them. You're a bankruptcy attorney. Does this say anything about what might happen to GM and the people who are involved in that case?
LAURIA: There are certainly similar issues. I know a lot more about Chrysler than I do GM. You have a situation where we have lenders who have already put their money in. It's been spent and you have employees who have to continue working to provide value going forward. So there's natural tension there in that relationship. I think the bigger question though is will the auto industry or any other troubled industry that may have important political issues associated with it be able to attract private financing on a (INAUDIBLE) basis? Certainly a lender who looks at what is happening to the lenders in the Chrysler case might have second thoughts. And we know there are other industries that are going to need rescue financing, the airline industry, GM coming up. Will the government be the only source of that financing? Certainly the administration says that they're hopeful that the private sector will participate, but I'm not sure that this is much of an inducement for that.
GERSH: Well, you were involved in these negotiations. Tell us what the government was like to deal with. What were they like leading up to this bankruptcy filing?
LAURIA: Well, one of the interesting things is we didn't really ever get to get in a room and negotiate with the task force. We had an eight- member steering committee that represented the bank debt for institutions that had received TARP funding and for institutions that had not. And that was the negotiating vehicle. When it got to a point where the view of the non-TARP lenders separated from those of the TARP lenders, we reached out separately to try to engage with the task force and although we're able to submit a proposal which contemplated a 50 percent reduction in the value of our claim, we're never able to engage with the other side. And in fact, I think that was one of the disturbing things is that it felt like we were really kind of getting the stiff arm and then when you turn on your TV the next day and hear the president say that my clients refused to make concessions when in fact they had offered a 50 percent concession and were in fact the bad guys when nobody would talk to us, it's a little troubling.
GERSH: Well, Tom Lauria, bankruptcy attorney, thank you for talking to us.
LAURIA: Thank you.
