NEW YORK, Nov. 18 — Last May 30, Robert Mundheim, the U.S Treasury general counsel, arranged a mid-afternoon meeting with representatives from less than a half dozen of the world's largest banks.
For two and a half days, Mundheim had been shuttling messages between two warring factions within the Chrysler Corp.'s lending group. One one side were the Canadian banks, which had quietly arranged a separate debt restructuring agreement with Chrysler's Canadian subsidiary; on the other were the U.S. and European banks, which objected to the favorable treatment given the Canadians.
Mundheim's delicate exercise in international diplomacy had finally paid off. After two days in virtual isolation, the Canadians had agreed to meet with the other bankers. The Canadians were ready to make a concession to the other lenders, but only after being convinced that without a concession Chrysler would be allowed to go bankrupt.
In a brief, icy session — with the Canadians refusing even to shake hands with the other lenders — the compromise was ratified. Almost three weeks after a May 10 meeting in which G. William Miller, Secretary of the Treasury, told a phalanx of reporters and TV cameras that Chrysler's lenders had approved a restructuring plan, the final, nearly disastrous confrontation with foreign banks was almost over.
The Canadians had agreed to demands that they delay the amortization of their loans to Chrysler Canada, Ltd., for three years. Grudgingly they assented to begin collecting principal and interest in September, 1986, the same month in which all other lenders are scheduled to begin collections.
A 'Deal Breaker'
Under their private agreement with Chrysler, the Canadians would have started collecting at the end of 1983, almost three years before the others. It was the prospect of waiting empty-handed for three years while the Canadians collected money that encouraged the Europeans and Americans to label their dispute with the Canadians a "deal breaker."
Even with the concession, the Canadians retained favored status. They never agreed to all the covenants of the U.S. and European deal, having stated months before that the Canadian arm of Chrysler was a separate company in a separate country, with problems that required a separate Canadian solution.
One of the covenants that the Canadians did not accept was a clause that now seems virtually sure to delay collections by other lenders until 1990. Under the basic restructuring agreement the non-Canadian lenders have agreed to postpone their amortization until all loans guaranteed by the U.S. government are repaid, a condition that may not be met until 1990.
With the Canadian concession, a string of last minute compromises among Chrysler's banks was complete. Finally Chrysler had a $4.75 billion debt restructuring that could be shipped to the company's lenders with the blessing of the Federal government. It had taken more than a month to turn the debt restructuring agreement forged in two eventful weeks in early April into a document that was acceptable to the U.S. government.
Shuttle to Washington
A push to sell the debt plan to the loan board had begun April 17. At noon, about 40 lenders, lawyers and Chrysler executives boarded an Eastern Airlines shuttle from LaGuardia Airport in New York headed for Washington. Two days earlier Steve Miller, Chrysler's assistant treasurer, and a few bankers had made the same flight with depressing results, hearing for the first time of the government's strong objections to the proposed restructuring. Now they were scheduled to meet at 2 p.m. with the Treasury officers that comprised the staff of the loan guarantee board.
