Chrysler has filed a “Declaration of Bradley A. Robins in Support of the Sale of the Debtors Assets to New Chrysler” (click document name to view) that includes as an attachment a fairness opinion of Greenhill & Co LLC. The fairness opinion relies heavily on a liquidation analysis of Capstone Advisory Group, LLC. That Liquidation Analysis concluded that “the value range” from a Chrysler asset liquidation (i.e. not as a going concern) “is $0.9bn to $3.2bn on an undiscounted basis”
The declaration further states that Greenhill was engaged to render an opinion on “the fairness, from a financial point of view, of the consideration to be received by Chrysler LLC in connection with the Sale.” The opinion described the proposed 363 sale as follows:
We understand that Chrysler LLC (the “Company”), certain subsidiaries of the Company, Fiat S.p.A. (“Fiat”) and New CarCo Acquisition LLC (“NewCo”) propose to enter into a Master Transaction Agreement (the “Master Transaction Agreement”), which provides, among other things, for the sale and transfer of substantially all of the operating assets and certain liabilities of the Company and its subsidiaries to NewCo (the “Transaction”). In exchange for the Purchased Assets (as defined in the Master Transaction Agreement), (a) the Company will receive $2,000,000,000 in cash and (b) NewCo will assume from the Company the Assumed Liabilities (as defined in the Master Transaction Agreement) (items (a) and (b) together, the “Consideration”).
Subject to numerous caveats and assumptions the fairness opinion concludes:
Based on and subject to the foregoing, including the limitations and assumptions set forth herein, we are of the opinion that as of the date hereof the Consideration to be received by the Company pursuant to the Master Transaction Agreement is fair, from a financial point of view, to the Company.
The opinion does not address any aspect of the bankruptcy other than consideration for the 363 sale. The opinion cautions that: “We were not requested to and did not provide advice concerning the structure, the specific amount of consideration, or any other aspects of the sale, or to provide services other than the delivery of this opinion.” Greenhill stated the same limitation in the affirmative. It described the objective of its financial analysis as a comparison of “(a) the implied economic value Chrysler is transferring by contributing certain assets to NewCo to (b) the economic value received from NewCo in exchange.”
The consideration to be received by Chrysler in the 363 sale transaction is only part of a “fairness” analysis of the plan of liquidation of Chrysler. Failure to address other aspects will limit the significance of the opinion to support the overall transaction structure. In particular, it should be expected that the pre-petition lenders will note that out of their pot they will be paying at least an estimated $1.7 billion in unsecured pre-petition debts to keep Chrysler viable pending a sale. The “net” proceeds of the 363 transaction in terms of benefit for the pre-petition secured lenders is only $300 million and knowing the costs of this type of bankruptcy this slim margin is likely to dissipate due to the costs incurred in delaying a liquidation while the 363 sale is accomplished.