46 Pages Posted: 30 Jun 2009 Last revised: 13 Jan 2015
Date Written: 2010
Chrysler entered and exited bankruptcy in 42 days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised considerable concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the 19th and early 20th century equity receiverships, and that its potential, if followed, for disrupting financial markets surrounding troubled companies in difficult economic times is more than small.
Keywords: corporate reorganization, bankruptcy, chapter 11
JEL Classification: G18, G30, G34, G38, J52, K11, K12, K22, L21, L62
Suggested Citation: Suggested Citation
Roe, Mark J. and Skeel, David A., Assessing the Chrysler Bankruptcy (2010). Michigan Law Review, Vol. 108, pp. 727-772, 2010; Harvard Law and Economics Discussion Paper No. 645; U of Penn, Inst for Law & Econ Research Paper No. 09-22; U of Penn Law School, Public Law Research Paper No. 09-17; Harvard Public Law Working Paper No. 09-42. Available at SSRN: https://ssrn.com/abstract=1426530 or http://dx.doi.org/10.2139/ssrn.1426530
By Mark Roe