April 30 (Bloomberg) -- President Barack Obama said Chrysler LLC lenders who turned down his buyout offers are a “small group of speculators” who forced the automaker into bankruptcy.

“A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” Obama said today in Washington before Chrysler filed for bankruptcy protection.

In bankruptcy, the company can now compel the dissidents, all secured creditors, to go along with a plan to create a more viable carmaker in partnership with Italy’s Fiat SpA.

Today, an anonymous group of 20 Chrysler lenders calling itself the “Committee of Chrysler Non-Tarp Lenders” said in a statement they’d been treated worse than junior creditors during negotiations in violation of “long-recognized legal and business principles.” They said they were owed $1 billion.

The dissidents included OppenheimerFunds Inc., Perella Weinberg Capital Management LP and Stairway Capital Advisors, a person representing the group said, asking not to be identified. Also in their camp is Group G Capital Partners LLC, said another person who declined to be named. After the president’s attack, Perella said it had agreed to the buyout offer.

Banks including JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. lent Chrysler $6.9 billion, reselling some of their secured loans at discounts to investors. Chrysler took a $4 billion bailout loan from the U.S. Treasury and was racing to reduce debt in order to meet a government deadline today for more aid, after workers agreed to give up $10 billion in future pension benefits.

While lenders representing 70 percent of the Chrysler loans agreed to Obama’s offer of $2.25 billion in cash, the dissidents ignored a deadline of 6 p.m. yesterday, according to one of the investors who declined to be named.

The Offer

Obama’s team first offered secured lenders $2 billion for $6.9 billion in loans, then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion yesterday, and Obama’s patience ran out. Many dissidents paid from 50 cents to 70 cents on the dollar for their Chrysler loans, so they’re sitting on losses, according to people familiar with the matter.

“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”

Dan Arbess, a partner at New York-based Perella, didn’t return calls for comment. Uniondale, New York-based Stairway principal John Rijo and Group G Capital Chairman Geoffrey Gwin declined to comment.

New York-based OppenheimerFunds said it rejected the offers because the government “unfairly” asked the fund’s shareholders to make greater sacrifices than were being asked of unsecured creditors.

Entitled to Priority

“Our holdings in secured Chrysler debt are entitled to priority in long-established U.S. bankruptcy law, and we are obligated to our fund shareholders to support agreements that respect these laws,” the company said in an e-mail.

Chrysler’s dissident lenders have on their side the “absolute priority” bankruptcy rule, which holds that value must be distributed according to the legal priorities of the stakeholders. What riled the group that put out the statement today was the fact that junior creditors, consisting of a workers healthcare trust, would get equity in a new Chrysler entity while they would not.

In the deal Chrysler was trying to conclude out of court, Fiat would have become a 20 percent owner of Chrysler, and a union retiree health-care trust fund would hold 55 percent, with the rest of the company staying in the government’s hands initially, according to people familiar with the matter. The government intends to replicate this, using bankruptcy to set up a new company, people familiar with the plan said.

Junior Creditors

“Junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full,” the dissidents said in the statement.

In bankruptcy court, the absolute priority rule is regularly modified, lawyers said. Two-thirds of the lenders can force the holdouts to go along with them in a procedure called a cramdown.

“The U.S. bankruptcy code foresees the possibility that it may be necessary to vary from ‘absolute priority,’ in particular when a two-thirds majority is convinced it makes legal or business sense,” said Richard Hahn, co-chairman of the bankruptcy practice at Debevoise & Plimpton LLP, a New York law firm that isn’t involved in the Chrysler negotiations. “If the government has consents from 70 percent, that’s more than enough” to give equity to junior creditors.

The dissidents “may be calculating that they can get more money by waiting a bit longer,” Hahn said. “Presumably they will file objections in court. The issue is less whether they’ll win than whether they can cause a meaningful delay that may cause Chrysler or the government to come to an accommodation.”

Public Anger

By lashing out at the dissident investors, Obama is tapping into the public’s anger to make clear who’s to blame for Chrysler’s bankruptcy and to ratchet up pressure on hedge funds and financial firms likely to object to the plan in court, said Stuart Rothenberg, a Washington-based political analyst.

“In the real world, you have good guys and bad guys, and at the moment, auto executives, hedge-fund managers and bankers are all in the bad-guy category,” said Rothenberg. “He wants to be the guy who’s solving the problems and wants to make it clear who’s causing the problems.”

The objections from the group of lenders also drew criticism from Michigan lawmakers, including Democratic Representatives John Dingell and Sander Levin.

“The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury -- firms I label as the ‘vultures’ -- will now be dealt with accordingly in court,” Dingell said.

The case is In re: Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net; Julianna Goldman in Washington at jgoldman6@bloomberg.net

Last Updated: April 30, 2009 17:51 EDT