The Financial Times reported over the holiday weekend that Old Carco, i.e. the old part of Chrysler, has defaulted on $3.3 billion worth of federal loan repayments that were due June 30. It has also racked up an additional $29 million in interest.
Old Carco said in a court filing it has received a past-due notice from the U.S. Treasury Department, and together with its unsecured creditors, is "negotiating with the U.S. Treasury to address this notice." It also notes that "no further borrowings are permitted."
Financial Times (sub.req)
flicmod says:
11:04 AM, 09/ 8/09
This is surprising...
greenpony says:
12:43 PM, 09/ 8/09
I'd hate to be the bum they picked to lead the "old" company.
cwc1 says:
04:12 PM, 09/ 8/09
How was the old Chrysler ever expected to pay back those loans anyway, when all the "good", money making assets were sold to the new Chrysler company under Fiat, who's not making any money yet either?
stovt001 says:
09:08 AM, 09/ 9/09
cwc1, that's what I've been wondering with both bankruptcies too. I assumed they were to pay off the debts by selling property (plants, brands, etc) but clearly that takes more than a few months to do, and there is no cash flow in the meantime.
flicmod says:
12:54 PM, 09/ 9/09
stovt001,
You're right. Bankruptcy was the force that was supposed to liquidate the unneeded/failing assets and use that capital to pay off the debts of the company. But that's not what happened. The "bankruptcy" that both Chrysler and GM went through was a kind of "bankruptcy-lite". It wasn't true. The courts allowed (unrightfully, I might add) both companies to displace their debt and bad assets to a strawman company that only effectively exists on paper. This isn't how bankruptcy is supposed to work.
As soon as it was released that the courts sped up the proceedings and allowed them to form "new" companies, we should've all see the writing on the wall and realized that none of those loans will be repaid.