Is U.S. Department of Treasury (the “Treasury”) Overreaching as DIP Lender?
I. The Treasury’s Role With the Treasury’s efforts to serve as a debtor in possession lender in the Chrysler Bankruptcy and the inevitable General Motor’s filing, many are wondering aloud as to whether the government’s involvement in these bankruptcies is changing bankruptcy law as we know it. The simple answer is: NO. Like any debtor in possession lender who agrees to provide post-petition financing under section 364 of the Bankruptcy Code, the Treasury determined that providing post-petition financing to Chrysler and GM enabled these companies to avoid a liquidation and maximize the value of the companies’ assets. With regard to the Chrysler Bankruptcy, the Treasury agreed to make available $7.7 billion in post-petition financing to enable Chrysler to sell its assets as part of a sale to Fiat S.p.A. under section 363 of the Bankruptcy Code. Similarly, the Treasury is expected to inject $50 billion in post-petition financing to GM so that it can reduce its debt to approximately $10 to
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