Chrysler ’s Chapter 11 bankruptcy has been quick and surgical – as promised – up until this point, but an appeal by a group of Indiana pension funds has officially delayed the sale of Chrysler to Fiat. The delay was ordered earlier today by Supreme Court Justice Ruth Bader Ginsburg.
A federal appeals court has already approved the sale of Chrysler to Fiat, but a last minute appeal by the pension funds to the U.S. Supreme Court has derailed Chrysler’s speedy exit from Chapter 11. It remains to be seen how long the appeal process will take, but the delay is viewed as only temporary at this point, according to MSNBC.
The Indiana funds – which hold $42 million of Chrysler ’s $6.9 billion debt – claim the automaker’s bankruptcy plan unfairly favors unsecured lenders over its secured lenders. Chrysler’s current plan will give secured lenders $2 billion, or about 29 cents on the dollar.
The funds also claim the U.S. government unconstitutionally used money from the Troubled Asset Relief Program to protect Chrysler’s bankruptcy financing.
While the delay is expected to be temporary, it has those at Chrysler sweating a bit. Chrysler’s tentative deal with Fiat includes a clause stating Fiat can exit the deal if no sale is reached by June 15th. If that scenario plays out, Chrysler will be left without a strategic partner, likely leading to the automaker’s liquidation.
