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Bankruptcy Funding Solicited for Car Makers
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By JEFFREY MCCRACKEN and JOHN D. STOLL
Outside advisers to the U.S. Treasury have started lining up the largest 
bankruptcy loan ever, talking with banks and other lenders about at least 
$40 billion in financing for General Motors Corp. and Chrysler LLC, in case 
the two auto makers need it, said several people familiar with the matter.

While acknowledging the grimness of the task, administration officials 
involved in the auto talks said they are trying to find a way to restructure 
the two companies without resorting to bankruptcy proceedings. They stressed 
the latest efforts were "due diligence" on the part of the government 
advisers, and that bankruptcy financing may not be necessary.

Still, people involved in talks with senior Obama administration officials 
said that the administration believes that the option of Chapter 11 filings 
by the two auto makers needs to be seriously considered.

"Everything is on the table right now," one person involved in the matter 
said, adding that President Barack Obama doesn't want to see more massive 
job losses in the auto industry. His administration also doesn't want to 
anger the United Auto Workers by appearing to push for bankruptcy, this 
person added.

The initial discussions call for private banks to provide the financing --  
known as a debtor-in-possession, or DIP, loan -- with the government 
guaranteeing or backstopping the loan. In this scenario, some of the 
financing would be used to pay back the $17.4 billion the government lent GM 
and Chrysler late last year.

Treasury advisers are handling the effort and keeping GM and Chrysler 
informed of the steps through back-door channels, said the people familiar 
with the matter. The interplay between the government, auto makers and the 
markets is proving to be complicated.
Lenders are reluctant to commit funding to GM or Chrysler for several 
reasons -- mostly concern they won't get all their money back. Recently, the 
government advisers have begun aggressively courting big lenders Citigroup 
Inc. and J.P. Morgan Chase & Co. -- themselves government-aid recipients --  
to participate in any bankruptcy financing, said people familiar with the 
matter.

The government advisers also are looking at ways the Treasury could "prime" 
other banks making DIP loans, so the government could be paid back before 
private creditors. Banks are deeply resistant to such steps. Both GM and 
Chrysler insist they can avoid bankruptcy, warning that option could cost 
the government as much as $125 billion in rescue financing. Bankruptcy 
experts say the sum isn't likely to be that high.

Even so, the estimated total of $40 billion in DIP financing GM and Chrysler 
would need would be five times as large as the previous record for such 
financing, which is used to fund day-to-day operations while companies sort 
out their debt. To fill such a large hole, Treasury's advisers are trying to 
corral as many as 70 lenders to participate in what is now informally called 
the "bank steering committee."
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So..... Citibank gets  $45 billion in cash, and an asset-loss guarantee of 
$301 billion, and FDIC guarantees on its issuance of corporate debt, with 
further discussions taking place to increase and alter the govts share of 
the company to 25-40% in common equity, rather than preferred shares and 
warrants...

And auto....?  But of course, as fixed assets and wage-labor are such a 
burden to the reproduction of capital.

Hey, here's an idea,-- all those banks that accepted capital injections; all 
those insurance and finance companies whose asset backed paper, and 
short-term instruments have now been guaranteed by the special credit 
facilities of the Fed-- all of them have to provide bridge financing to 
retire the automakers debt-- at MARKET, not notional, value--, also funding 
fully the pension benefits and health care requirements for both active and 
retired employees....

How about that, Mr. Geithner?