THE CHRYSLER BANKRUPTCY PRECEDENT AND THE PHOENIX COYOTES

A couple of months ago, I wrote that the treatment of the senior lenders by the Auto Task Force and the Treasury was a bad precedent that would negatively impact bank lending to financially troubled companies in the future. Then the Task Force imposed its deal on the senior lenders in the bankruptcy and the judge in the matter sped the plan through, make that the Section 363 sale, in near record time. How long would it take for another group to try to speed a plan, make that a Section 363 sale, through the court at the expense of some other group of stakeholders?

Well, welcome to the Phoenix Coyote hockey team bankruptcy and the application of the 'Chrysler Precedent'. A lawyer for the team is trying to make the case for a quick sale of the Coyotes to a buyer who wants to move the team to Ontario. The lawyer is evoking the so-called 'Chrysler Precedent' to push for a quick Section 363 sale instead of the normal reorganization process that allows for a full vetting of the alternatives and input from the various parties-in-interest.

The NHL and other parties are protesting that there is no emergency that requires the end run around the normal process. They state that the sale of the Coyotes should go through the normal process. The NHL and others are looking for a local owner.

Let's hope the judge puts a stop to the Section 363 end run around the normal plan of reorganization process in the matter. The Chrysler Precedent was a bad one the cost of which is still to come.

Cheers, Mike