Article published June 10, 2009
Analysis: Indiana pension funds' loss tiny compared to Chrysler's
By LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER
The three government-controlled Indiana funds that had sugared the gas tank of Chrysler LLC's race through bankruptcy were doing so because they stood to lose about $5.6 million, or 13 percent of their investment - less than most because they bought in at bargain-basement prices.
Meanwhile, according to the Treasury Department, Chrysler has been losing an estimated $100 million a week while it is in Chapter 11.
Yesterday, Chrysler's prospects brightened - while the pension funds' were dealt a final blow - when the U.S. Supreme Court lifted a stay issued on Monday that briefly held up the sale of the automaker to Fiat SpA.
In August, 2007, the three Indiana state funds - one representing retired police officers, another retired teachers, and the third used to build roads and bridges - purchased $100 million of Chrysler's debt through J.P. Morgan Chase on the secondary market. The sale occurred about three months after Chrysler was acquired by private equity firm Cerberus Capital Management from the automaker's former German partner/owner, Daimler AG.
When they bought the debt, the Indiana funds paid $43.9 million for the $100 million note and received interest payments for the 20 months that they held the assets. Chrysler's $6.9 billion in debt was secured by the assets of the company, everything from the venerable Jeep brand name to the plumbing fixtures in its plants.
Before Chrysler went into bankruptcy on April 30, the Treasury Department offered the three Indiana funds the same terms given to Chrysler's other secured creditors: 29 cents on the dollar for what they were owed. In their case, that meant about $29 million in cash out of $2 billion being offered overall - plus interest already had received - as a return on their $44 million investment.The government and the bankrupt automaker argued in court that Chrysler's assets had a liquidation value of about $800 million, compared to the government's offer of $2 billion for secured creditors to allow the transaction with Fiat to go forward.
According to Indiana's treasurer, Richard Mourdock, the government's offer meant a loss of $4.6 million to the teachers fund, $147,400 to the police fund, and $896,000 to the state's major moves construction fund.
By comparison, according to a Treasury Department official who testified last week at a bankruptcy hearing, Chrysler is losing $100 million a week in Chapter 11. Its decision to cease nearly all North American production when it entered bankruptcy protection severely curtailed its revenue.
Mr. Mourdock, an appointee of Republican Gov. Mitch Daniels, filed his objection to Chrysler's proposed emergence from bankruptcy while acting as sole trustee for the three funds, a spokesman for Mr. Mourdock's office said. The objection - dismissed by the bankruptcy judge and the U.S. Court of Appeals - jeopardized the planned June 29 return to work of thousands of Toledo-area Chrysler autoworkers when on Monday U.S. Supreme Court Justice Ruth Bader Ginsburg issued a stay in the case.
It is not the first time that a move by Mr. Daniels or his administration has antagonized labor unions. Hours after taking office in 2005, the governor issued an executive order rescinding the collective bargaining rights of 23,000 state employees.
Contact Larry P. Vellequette at:
lvellequette@theblade.com
or 419-724-6091.
Permanent Link
|
|
 |
|
|
|
|
|
|
|
|
|
ADVERTISING SECTIONS
|
|
|
|
|
More columnist stories |
|
|
|
|
|
News Headlines
Business Headlines
Sports Headlines
Features Headlines
|
|
|
Search
advertisement
