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, ET
)
In re ) Chapter 11
)
CHRYSLER, LLC, et al., ) Case No. 09-50002-AJG
) Jointly Administered
Debtors. )
)
hereby file this motion (the “Motion”) pursuant to sections 105 and 107 of title 11 of the United
States Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”), Rule 9018 of the Federal Rules
of Bankruptcy Procedure (the “Bankruptcy Rules”) and General Order #M-242 of this Court
1
The Chrysler Non-TARP Lenders are comprised of holders, or investment advisors to holders, of the Senior
Debt (as defined below).
Statement of White & Case LLP (“White & Case”) pursuant to Bankruptcy Rule 2019 (the
“2019 Statement”). In support of the Motion, the Chrysler Non-TARP Lenders respectfully state
as follows:
PRELIMINARY STATEMENT
While the present case is unusual in many ways, perhaps the most extraordinary is
the unprecedented involvement of the United States government. Never before has the President
of the United States announced a chapter 11 filing in a national address. Even more remarkably,
the President singled out creditors who did not agree to the government’s intentions regarding
Chrysler, which includes paying billions of dollars to unsecured creditors while paying first-lien
secured creditors less than thirty cents on the dollar. The President publicly chastised these
secured creditors for having the temerity to enforce their constitutional rights in this court of law,
branding them as “speculators,” making clear that “I don’t stand with them.” The President’s
remarks announcing the bankruptcy filing are merely the most public in a series of steps
undertaken by the current administration to subvert the rule of law by forcing Chrysler
stakeholders to agree to a sub rosa plan of reorganization which wholly ignores time honored
bankruptcy principles.
The government now comes before this Court and trumpets the fact that many of
Chrysler’s lenders have succumbed to these coercive tactics. Indeed, a decreasing number of
creditors remain willing to ask this Court for fair treatment under the law. The pressure on the
Chrysler Non-TARP Lenders grows by the hour. For this reason, a number of lenders have
sought representation in this case, but only on the condition that their identity not be disclosed
publicly. Accordingly, the Chrysler Non-TARP Lenders seek an order allowing White & Case
Non-TARP Lenders. Denial of this relief will force several of these lenders to surrender their
legal rights and agree to the government’s illegal plan. Those lenders that continue to seek to
enforce their legal rights will be subjected to threats to their reputations and businesses, public
attack, and threats to their safety. This cannot be allowed. Under these circumstances, the
BACKGROUND
I. Procedural Background
1. On April 30, 2009 (the “Petition Date”), Chrysler LLC and numerous
affiliates (“Chrysler” and together with its affiliated debtors and debtors in possession, the
“Debtors”) filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code, thereby
commencing their respective chapter 11 cases (collectively, the “Chapter 11 Cases”). The
Debtors are operating their businesses as debtors and debtors in possession pursuant to sections
1107 and 1108 of the Bankruptcy Code. The Chapter 11 Cases are being jointly administered for
procedural purposes.
2. Chrysler and certain of its affiliates are parties to that certain Amended
and Restated First Lien Credit Agreement, dated as of August 3, 2007 (as may have been
amended or supplemented, the “Senior Credit Agreement”) with JPMorgan Chase Bank N.A., as
administrative agent, and certain lenders party thereto from time to time (the “Senior Lenders”),
under which the Senior Lenders are owed $6.9 billion (the “Senior Debt”) secured by a first lien
on substantially all of the Debtors’ U.S. assets, including their plants, equipment, inventory and
bank accounts (the “Collateral”). Senior Credit Agreement § 2(a); Affidavit of Ronald E. Kolka
3. The Chrysler Non-TARP Lenders are holders of over $300 million of first
priority secured claims. These claims arise out of nearly $7 billion of Senior Debt, which was
issued by Chrysler when it was re-purchased from the German automaker Daimler in 2007.
Senior Credit Agreement § 2.1. These loans financed the purchase of the company and were
hailed at the time for returning Chrysler to U.S. control. The loans were secured by first priority
were secured by first priority liens on substantially all of Chrysler’s U.S. assets. These liens, and
the security they afforded, were crucial to the Senior Lenders, who invest billions of dollars on
behalf of, among other institutions, pension funds, university endowments and individuals. The
Senior Lenders paid for this security. In exchange for the lower risk of secured liens, the Senior
Lenders agreed to accept an interest rate that was far lower than would have been paid for an
unsecured loan, and far lower than the rate of return paid to many of the Debtors’ other creditors.
5. In December of 2007, less than a month after the Senior Lenders’ loan to
Chrysler, the United States economy entered into possibly the most severe recession in the last
60 years. Over the course of 2008, Chrysler’s business, along with that of the rest of the U.S.
automotive industry, deteriorated dramatically. See Chrysler Plan for Long-Term Viability, Feb.
17, 2009 at U32-37 (the “Feb. 17, 2009 Viability Report”); Kolka Aff. ¶¶ 55-58. According to
the Debtors, frozen credit markets and low consumer confidence took hold by the second quarter
of 2008, resulting in the lowest U.S. auto sales since the early 1980s. Feb. 17, 2009 Viability
Report at U32-37; Chrysler Plan for Short-Term and Long-Term Viability, Dec. 2, 2008 at 4 (the
$16 billion in lost revenue, creating tremendous pressure on both Chrysler’s financial
performance and cash position. Kolka Aff. ¶ 57. By the end of 2008, Chrysler was left with
caused it to seek financial assistance from the United States government. See Dec. 22, 2008
Viability Report; Kolka Aff. ¶ 59. According to Chrysler, it required a $7 billion cash infusion
from the government in order to implement an out-of-court restructuring that would allow it to
continue as a going concern. Dec. 22, 2008 Viability Report at 4; Kolka Aff. ¶ 62.
Agreement with the United States Treasury (“Treasury Loan and Security Agreement”). Kolka
Aff. ¶ 68. Under the terms of that agreement, the government lent Chrysler $4 billion on a third-
and Security Agreement § 2.01; Treasury Loan and Security Agreement §§ 2.05, 4.01. Thus, the
government took a security interest in Chrysler’s assets which was junior in priority to the
existing liens of the Chrysler Non-TARP Lenders. As a condition to receiving this loan, the
government required Chrysler to submit a viability plan that would explain Chrysler’s plan for
survival. Treasury Loan and Security Agreement § 7.20(a); Kolka Aff. ¶ 68. Chrysler also
agreed to provide periodic financial projections and cash forecasts. Treasury Loan and Security
Agreement § 7.01. If the government agreed with Chrysler’s viability plan, it would lend
Chrysler an additional $3 billion. If the government did not agree, it would refuse to provide
Industry on February 17, 2009. Kolka Aff. ¶ 68. The viability plan submitted by Chrysler called
for a reorganization of Chrysler on a stand-alone basis. Feb. 17, 2009 Viability Report at 13. In
the viability plan, Chrysler admitted that it could not survive absent relief from the Senior
Lenders’ debt and debt owed to unsecured creditors, namely the United Auto Workers Union.
Kolka Aff. ¶¶ 79, 80. Chrysler also stated that during the course of this reorganization and
following it, Chrysler would seek to finalize an alliance with Fiat S.p.A (“Fiat”). Feb. 17, 2009
9. On March 30, 2009, President Obama announced that the government had
determined Chrysler was not viable as a stand-alone going concern. See Remarks by the
/the_press_office/Remarks-by-the-President-on-the-American-Automotive-Industry-3/30/09,
attached as Exhibit A to the Declaration of Brian E. Fritz (the “Fritz Declaration”), attached
hereto as Exhibit 1. The President informed the country that Chrysler would be given 30 days to
reach an agreement with Fiat, its unions, and its creditors (including the Senior Lenders) under
which Chrysler and Fiat would combine to form a new entity. Id. The President made clear that
his strategic vision for Chrysler required Chrysler to restructure itself in way that enabled it to
gain access to Fiat’s “cutting edge technology” so that Chrysler can produce the type of smaller
cars the government wants manufactured, satisfy the demands of union laborers, and protect the
Chrysler’s management. Id. The White House also began to mischaracterize Chrysler’s Senior
Lenders as unwilling to compromise by stating that: “It’ll require creditors to recognize that they
can’t hold out for the prospect of endless government bailouts.” Id.
hand with the President’s Auto Task Force and the U.S. Treasury in an effort to make the
President’s strategic vision a reality. Kolka Aff. ¶¶ 84-85. Chrysler’s agreement to this political
agenda marked the end of independent management. Chrysler stopped functioning as a private
company and became an instrument of the government. Chrysler’s conduct in the month
following the government’s ultimatum made this abundantly clear. First, it appears that Chrysler
ceased all serious efforts to explore alternative ways to raise cash or sell assets. For example, it
appears Chrysler abandoned, for the most part, attempts to sell-off any of Chrysler’s brands as
going concerns, which could bring substantial sums. The government-imposed agreement
prohibited Chrysler from pursuing alternative transactions with any entity other than Fiat. Fiat
Term Sheet at 14. The government negotiated on Chrysler’s behalf with the other constituents –
such as labor unions and suppliers – considered important to operate the newly created entity co-
owned by Fiat. Kolka Aff. ¶¶ 86-88; U.S. Treasury Statement in Support (“U.S. Treasury
Statement”) ¶ 6.
E. Chrysler Files For Bankruptcy To Force the Sale to Fiat And Wipe Out
Secured Debt.
11. On April 30, 2009, the Debtors commenced these Chapter 11 cases.
Although the Debtors filed under chapter 11 of the Bankruptcy Code, their first day filings make
clear that they have no intention (or even possibility) of reorganizing these estates. Instead, the
Debtors have filed a motion seeking approval to sell substantially all of their assets, free and
clear of liens, to a newly formed company created for the purpose of this transaction (“New
Chrysler”). Sale Motion at 57; Kolka Aff. ¶ 88. The purpose of this transaction is to transfer
value from the Senior Lenders’ collateral to other Chrysler stakeholders without regard to the
priority of creditor claims. For example, though the Senior Lenders will recover less than 30%
Debtors’ competitors, Fiat, is to receive 20% of New Chrysler (with the right to acquire a total of
51%) in exchange for granting access to its “small car” technology. Kolka Aff. ¶ 88. Fiat is not
paying any cash for its stake in New Chrysler. Id. The U.S. Treasury, a creditor with liens on
the Collateral that are junior to those of the Senior Creditors, is slated to receive an 8% equity
interest in New Chrysler. Kolka Aff. ¶ 88. The only assets to be left in the estate are those assets
New Chrysler deems worthless. Even the Debtors describe the sale as a sale of “substantially
announced by the President of the United States. President Obama’s announcement made clear
that he had made the decision to put Chrysler into bankruptcy. He blamed this decision on the
www.whitehouse.gov/the_press_office/remarks-by-the-president-on-the-Auto-Industry
4/30/2009, attached as Exhibit B to the Fritz Declaration. He accused these lenders of refusing
to compromise and instead seeking “an unjustified taxpayer-funded bailout.” Id. The President
13. First, the Chrysler Non-TARP Lenders are not speculators. They invested
in first-lien secured debt, which is (or at least should be) a conservative investment. Second, the
Chrysler Non-TARP Lenders offered to compromise. They offered to accept a 40% reduction of
their debt, even though they could receive a better recovery in a chapter 7 liquidation. Their
offer was in stark contrast to other Chrysler stakeholders, whose “compromise” will enable them
to receive a much larger recovery then they are entitled to receive under the Bankruptcy Code.
Finally, the Chrysler Non-TARP Lenders have never sought a government bailout. Indeed, they
mega TARP banks, who accepted billions of taxpayer dollars, the Chrysler Non-TARP Lenders
have never received a dime from the government. To the contrary, it was the government that
was taking from them. Under the government’s plan, billions of dollars of Collateral belonging
to the Chrysler Non-TARP Lenders (and other Senior Lenders) will be taken away and given to
unsecured and junior lien creditors and (ironically) Fiat, a foreign automaker. Because the
Chrysler Non-TARP Lenders asked to be paid for their interests in that Collateral, they were
14. The President proclaimed that he stood against the Chrysler Non-TARP
Lenders: “I don’t stand with them.” The White House further proclaimed in a press release
issued the day of Chrysler’s bankruptcy filing, “while many stakeholders made sacrifices and
worked constructively in this process, some did not. In particular, a group of investment firms
and hedge funds failed to accept reasonable offers to settle on their debt. In order to effectuate
this alliance without rewarding those who refused to sacrifice, the U.S. government will stand
behind Chrysler’s efforts to use our bankruptcy code to clear away remaining obligations and
emerge stronger and more competitive.” See Press Release: Obama Administration Auto
15. The President is not the only public figure to engage in this propaganda
campaign. On May 1, 2009 the Governor of Michigan made a radio address in which she stated
her belief that Chrysler would be reorganized “in spite of a few greedy hedge funds that didn’t
care how much pain the company’s failure would have inflicted on families and communities
everywhere. Their refusal to share in the sacrifice caused the bankruptcy proceedings to begin.”
“Granholm Says Chrysler Agreement, Small Businesses Good, News for Michigan’s Future”,
Congressman John Dingell said “the rogue hedge funds that refused to agree to a fair offer to
exchange debt for cash from the US Treasury— firms I label as ‘the vultures’ will now be dealt
16. These hostile words have had their impact. Certain members of the public
have expressed their rage at the Chrysler Non-TARP Lenders. The following is a sample of
posts on the Washington Post website in response to an article about Chrysler and the Chrysler
Non-TARP Lenders:
17. As a result of this anger, the Chrysler Non-TARP Lenders are afraid, and
with good reason. In the last week, the Chrysler Non-TARP Lenders targeted by the President
received various threats, including dozens of death threats directed to their employees. As a
18. Given the hostile climate caused by the government’s publicity campaign,
a number of the Chrysler Non-TARP Lenders desire to object to certain aspects of the Debtors’
RELIEF REQUESTED
sections 105(a) and 107(b) of the Bankruptcy Code, Bankruptcy Rule 9018, and General Order
#M-242 authorizing White & Case to file in redacted form and under seal the 2019 Statement.
The Chrysler Non-TARP Lenders will provide the unredacted 2019 Statement to the Court for an
20. Under Bankruptcy Rule 2019, White & Case is required to make certain
disclosures regarding the Chrysler Non-TARP Lenders. See Fed. R. Bankr. P. 2019. Courts
have wide discretion to determine whether the requirements of Bankruptcy Rule 2019(a) have
been satisfied. See Fed. R. Bankr. P. 2019(b) (“On motion of any party in interest or on its own
initiative, the court may (1) determine whether there has been a failure to comply with the
provisions of subdivision (a) of this rule . . .”); see also Certain Underwriters at Lloyd’s, London
& Certain London Market Ins. Cos. v. Future Asbestos Claim Representative (In re Kaiser
Aluminum Corp.), 327 B.R. 554, 559 (D. Del. 2005) (noting that “Rule 2019(b) vests the
Bankruptcy Court with the discretion to determine whether there has been a failure to comply
discretion to allow White & Case to file its 2019 Statement under seal. There are at least three
separate grounds on which the Court can base such an order. First, section 107(b) states that the
Court “shall” on the “request of a party in interest” issue an order to “protect an entity with
defamatory matter contained in a paper filed in” a case under the Bankruptcy Code. 11 U.S.C. §
107(b). Second, section 107(c) allows the court “for cause” to protect an individual with respect
to certain types of information, including any means of identification, “where disclosure of such
information would create an undue risk of … unlawful injury to the individual or the individual’s
property.” 11 U.S.C. § 107(c). Third, Bankruptcy Rule 9018 permits a court to make “any order
which justice requires (1) to protect . . . any entity in respect of . . . commercial information [or]
(2) to protect any entity against scandalous or defamatory matter contained any paper filed in a
case under the Code . . . .” Fed. R. Bankr. P. 9018. “When the requirements of Rule 9018 are
satisfied, the authority to issue the resulting order is broad -- any order which justice requires.”
In re Global Crossing, Ltd., 295 B.R. 720, 724 (Bankr. S.D.N.Y. 2003). Such “authority goes
not just to the protection of confidential documents, but to other confidentiality restrictions that
22. Each of the above provisions is satisfied on the extraordinary facts of this
case. The Chrysler Non-TARP Lenders are seeking to protect commercial information –
specifically their reputational interests that are being tarnished by inaccurate and misleading
information disseminated by the executive branch of the United States government. The failure
to issue such an order puts these parties at risk of undue influence on the part of the government
and physical danger in the form of death threats. This threatens the most fundamental of the
Rule 2019 in far less compelling cases. See Kaiser, 327 B.R. at 560 (holding that bankruptcy
court did not err in entering orders that restricted access to Bankruptcy Rule 2019 information
submitted by law firms representing multiple asbestos personal injury claimants in the debtor
(Bankr. D. Del. Oct. 22, 2004) (Docket 13091) (entering similar orders restricting public
dissemination of 2019 information); see also In re Mirant Corp., Case No. 03-46590 (DML)
(Bankr. N.D. Tex. April 20, 2005) (Docket 9408) (sealing 2019 Statement to protect
24. In Kaiser, the district court affirmed the bankruptcy court’s order limiting
access to a 2019 statement that contained personal identifying information of asbestos claimants.
Id. at 560 (“[c]ourts have supervisory power over their records and files and may deny access to
those records and files to prevent them from being used for an improper purpose.”). The Kaiser
court prohibited access to the 2019 statement unless the party seeking the information filed a
motion and secured an order authorizing access. Id. This was done to protect the privacy
interests of the asbestos claimants and keep their personal information out of the public record.
See id. The district court found that the bankruptcy court’s order struck the “appropriate balance
between maintaining the public’s right to access the Rule 2019 information and ensuring that the
25. Here, the Chrysler Non-TARP Lenders’ privacy interest is greater than
that at issue in Kaiser. The Chrysler Non-TARP Lenders need to protect their personal
identifying information in order to protect them from both the strong-arm tactics of the
identifying targets for coercion and threats is clearly an “improper purpose” that this Court has
Airlines Corp., where the court found that the facts presented there did not warrant the sealing of
a 2019 statement. 363 B.R. 704 (Bankr. S.D.N.Y. 2007). The facts in Northwest Airlines were
nothing like those presented here. In that case, the court denied a motion to seal based on two
key facts. First, the members of the shareholders’ committee seeking to seal the 2019 Statement
did so in an effort to preserve the members’ individual financial advantage. Id. at 708. Second,
the court noted that there was a potential issue concerning whether certain of those equity
committee members were acting for the benefit of their committee or for the benefit of other
stakeholder groups of which they were also members. See id. at 704. This made the identity of
these committee members highly relevant. See id. When the court balanced these two interests
it determined that it was “not unfair” to require the 2019 to be filed publically. See id. at 708-09.
27. Here, the facts are very different. The Chrysler Non-TARP Lenders do
not seek to seal the 2019 Statement to protect their individual financial advantage at the expense
of the larger group, nor are their loyalties divided. Unlike many other entities represented in this
case, they did not receive any special compensation from the government in the form of TARP
money. The Chrysler Non-TARP Lenders’ only incentive is to obtain the full, fair market value
of the Collateral pledged to specifically secure their claims. Instead, the Chrysler Non-TARP
Lenders seek only the right to assert their objections in court without fear of retribution or death
threats. This interest is far more compelling than the countervailing interest at issue in
Northwest Airlines.
recognized the need to protect the identity of litigants and other parties in interest. This is
particularly true where, as here, the public disclosure of a parties’ identity could subject that
party to threats or coercion. In Lozano v. City of Hazleton, for example, the court allowed
plaintiffs to proceed anonymously in order to prevent intimidation that may cause them to drop
out of the lawsuit. 496 F. Supp. 2d 477, 508 (M.D. Pa. 2007); see also EW v. New York Blood
Center, 213 F.R.D. 108, 110 (E.D.N.Y. 2003) (holding that plaintiff’s right to privacy and
security must be balanced against the public interest in identification of litigants and the harm to
the defendant from plaintiff’s use of a pseudonym). The same is true in cases where only
commercial interests are at stake. See In re Epic Assocs. V, 54 B.R. 445, 450 (Bankr. E.D. Va.
1985) (protective order to protect the identity of creditors that were exposed to loss as a result of
CONCLUSION
29. If there is one thing on which all parties agree it is that these Chapter 11
Cases are unprecedented in many ways. One of these ways is the pervasive government
involvement in these cases, as well as the passion with which the public is engaged in this
process. These extraordinary facts present the Chrysler Non-TARP Lenders with extraordinary
challenges. All they seek is the opportunity to preserve their rights under the Constitution of the
United States and well settled bankruptcy law. Public disclosure of their identity forces them to
choose between abandoning those rights and endangering their businesses and their safety. This
Court should exercise its power to protect the identities of these parties and allow them to assert
their case without fear of retribution. The Motion should therefore be granted.
30. Notice of this Motion will be provided to: (i) the Office of the United
States Trustee; (ii) the Debtors; (iii) the Debtors’ 50 largest unsecured creditors on a
consolidated basis; (iv) counsel to the administrative agent of the Senior Credit Agreement; (v)
counsel to Daimler; (vi) counsel to Cerberus; (vii) counsel to the UAW; (viii) counsel to the U.S.
Treasury; and (ix) all entities having filed a request for notice pursuant to Bankruptcy Rule 2002
31. The Chrysler Non-TARP Lenders submit that no other or further prior
NO PRIOR REQUEST
32. No prior request for the relief sought in the Motion has been made to this
the Court enter an order authorizing White & Case to file the 2019 Statement in redacted form