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Bodman Financial Crisis Response Team Alert for May 13, 2009
5/13/2009The End Game —Chrysler Files for Bankruptcy, Government Deadline for General Motors Approaches
Since our last Alert, extraordinary things have happened: Chrysler filed a bankruptcy petition in New York, the May 30 deadline set by the government for General Motors is fast approaching, and Chrysler’s approximately 30 non-TARP lenders (the lenders not receiving TARP money) have acquiesced to the government’s demand that they settle their secured claims on terms they had previously rejected. For General Motors, the Chrysler non-TARP lenders’ actions offer hope that it may be able to avoid bankruptcy. GM has offered its bondholders, who hold more than $27 billion in debt, a 10% equity interest in the company in exchange for the debt. The bondholders have until May 27 to accept or reject the offer. GM has announced that it needs 90% of the bonds to be exchanged in order to meet Treasury Department guidelines for additional loans. Whether GM and the bondholders can reach agreement will probably be the biggest single factor in whether General Motors files a bankruptcy petition. Click here for a New York Times article on the proposed debt-for-equity exchange.
In a related development, Ford announced on May 11 that it intends to sell 300 million common shares in a public offering aimed at raising approximately $2 billion (the offering will price after the close of business on Tuesday, May 19). The fact that Ford can obtain equity financing from the public markets, and with an underwriting group made up of Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley, is very significant and offers optimism for its prospects.
Mortgage Loan Modifications – Recent Developments for Second Mortgages
The Treasury Department recently announced a second mortgage lien modification program. This program, which offers significant incentives to lenders and servicers who agree to modify second mortgages, is similar to Treasury’s first mortgage lien modification program. The program is evolving, however, with details to come. Dave Barton, of Bodman’s Bank Regulatory Group, provides the details.
Federal Tax Incentives for Green Building Improvements
Federal income tax policy has swung strongly in favor of commercial building owners who undertake certified energy improvements. These benefits can be substantial. Craig Hupp, of Bodman’s Environmental Group, explains new developments.
Property Tax Appeals – Filing Deadlines Approaching
Real property values have plummeted as a result of the financial crisis. Local units of government, anxious to maintain property tax revenue, have been slow to keep up with the market in determining property values. Jay LaBarge and Andy Spilkin, of Bodman’s Real Property Group, explain the filing deadlines and process for those wishing to file property tax appeals.
A Trap for the Unwary Lender and Developer – Successor Developer Liability Under the Condominium Act
The Michigan Condominium Act imposes significant liabilities on “successor developers.” Sandy Sorini Elser, of Bodman’s Real Estate Group, provides the details.
Bank Stress Tests and Return of TARP Money
Most institutions who received TARP money feel they cannot return it soon enough, as frustration with increasing regulation of TARP recipients, much of which has been retroactive, has grown. The Treasury Department and the Federal Reserve are expected to issue TARP repayment guidelines in the near future. It is clear that one of the conditions to repayment will be that the institution involved must be able to issue debt without the help of governmental facilities such as the FDIC’s debt guarantee program. Click here for an op-ed piece by Treasury Secretary Geithner discussing this issue.
We will update these messages on a regular basis. We are also available to answer any questions with respect to the financial crisis, the troubled automotive sector in Michigan, and related matters.
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Copyright 2009 Bodman LLP. Bodman LLP has prepared this Financial Crisis Response Team Alert for informational purposes only. This message is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking professional counsel.