NEW YORK, Nov. 25 — The final weeks of Chrysler Corp.'s effort to restructure its debt were the most public of the long negotiations. Reports appeared daily in major newspapers on the status of two dozen lenders that were refusing to sign the restructuring agreement.
That coverage provided the public with a rare glimpse of the long, acrimonious debates within the banking industry, but it left images that are disturbing and misleading. It appeared to many people that a handful of giant money center banks used thinly veiled threats to bully smaller banks into joining the restructuring, with these smaller banks heroically opposing the will of a powerful few.
Those images reveal the intensity of the effort at persuasion mounted by the company and the banks, but they do not give a complete picture. Certainly, arms were twisted and friendships were stretched during the push to sell the credit. To a far lesser extent there was bullying.
But most of the persuasion was polite and professional, emphasizing the costs of a Chrysler failure to the country and to the individual bank. The message communicated to every reluctant bank was that if one bank failed to join the credit, Chrysler would go under.
The talks were meticulously planned by the company, the bankers and their lawyers. Beginning in mid-May, Manufacturers Hanover had begun keeping detailed tallies of the position of every bank in every Chrysler and Chrysler Financial credit.
In June the central responsibility for collecting that information passed to Debevoise, Plimpton, Lyons & Gates, Chrysler's lawyers. But the bank and the law firm worked together closely, and the bank kept a parallel computerized tally that was posted on the walls of MHT's 15th floor "war room."
In weekly meetings at Debevoise Plimpton, the company, the lawyers and the bankers would discuss the status of the individual banks that had not yet signed the restructuring agreement. A bank that remained undecided or opposed would receive telephone calls from carefully selected individuals who knew someone at the holdout bank or had a business relation with the institution.
The calling effort involved hundreds of individuals. John F. McGillicuddy, the chairman of Manufacturers Hanover, spent days on the phone in June, as did dozens of less senior bank officers. Richard H. Cummings, vice chairman of National Bank of Detroit, spent days flying in to talk with smaller banks in the U.S., while top officers of a number of the major foreign participants called their counterparts at European holdouts to woo them to support of the plan. Many of the lawyers were on the phone constantly, and of course the financial teams at Chrysler and Chrysler Financial were pressing their case with the hundreds of lenders that had called on the company regularly for years.
Selective Clout
The pressure was focused on the holdouts with the largest credit commitments, leaving less important banks in the uncomfortable position of not knowing whether their opposition was even being noticed. The calls that came were cordial. "We were asked if we had any questions about the credit and were reminded of the importance of keeping Chrysler in business," says an executive of one bank that made the holdout list.
As larger holdouts swung to the credit and the list of holdouts decreased, pressure built. More attention could be focused on individual banks. If the bank, the company and the new law teams were stonewalled, suppliers to Chrysler were enlisted. Some called holdout banks with which they did business, while others telephoned individuals they knew at companies whose top executives were directors of holdout banks.
