OppenheimerFunds Inc., the only mutual fund manager listed among opponents of the U.S. government's restructuring plan for Chrysler LLC, dropped out of the effort, precipitating the collapse of the dissident lenders' group.

The $1.3 billion Oppenheimer Senior Floating Rate Fund, whose stated goal is to preserve investors' capital, bought $83 million of the debt. It was the fund's third-largest holding as of Jan. 31. OppenheimerFunds also bought debt for other funds and ultimately held about $100 million.

The investment pitted OppenheimerFunds' fund co-managers, Joseph Welsh and Margaret Hui, along with hedge funds and distressed debt investors, against President Obama, who blamed the holdouts for forcing the automaker into its bankruptcy filing April 30. The continued opposition threatened plans to sell Chrysler's assets to Fiat SpA.

OppenheimerFunds, a unit of Massachusetts Mutual Life Insurance Co., accumulated the debt beginning in the first half of last year, after bankers sold it for below 70 cents on the dollar. Chrysler's loan is now valued at 27 cents on the dollar.

In addition, the Oppenheimer Master Loan Fund LLC bought $11 million of Chrysler debt at distressed prices, filings show.

OppenheimerFunds said Friday that it "has determined that the senior creditors can no longer reasonably expect to increase the recovery rate on the debt they hold by opposing the task force's restructuring plan."

Within an hour of the announcement, the rest of the dissident group, calling itself Chrysler's Non-Tarp lenders, withdrew objections to the sale to Fiat, according Tom Lauria, the White & Case LLP attorney representing the group.

"After a great deal of soul-searching and, quite frankly, agony, they concluded they just don't have critical mass to withstand the enormous pressure and machinery of the U.S. government," Lauria said.

Chrysler's $7 billion term loan was underwritten in 2007 by JPMorgan Chase & Co., Goldman Sachs Group Inc., Bear Stearns & Co., Morgan Stanley and Citigroup Inc. to back Cerberus Capital Management LP's takeover of the automaker from DaimlerChrysler LLC.

The bankers failed twice to offload the debt as the financial crisis reduced demand for all but the safest investments. In April of last year Goldman sold $500 million of the loans at 63 cents on the dollar to a group that included hedge funds.

The lenders would not support the Obama plan to restructure Chrysler after they were offered $2.25 billion in exchange for $6.9 billion of the debt, or 33 cents on the dollar. The government offer would pay the group $2 billion.

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