Chrysler’s Chapter 11 bankruptcy case has been quick and surgical – as promised — up until this point, but will face its first real challenge as the automaker’s sale to Fiat enters a federal appeals court later today. A judge cleared the sale of Chrysler to Fiat earlier this week, but that decision could be overturned.
The appeal, filed by a group of Indiana pension funds, claims Chrysler’s reorganization plan favors junior lenders over senior lenders and is therefore illegal. Under the current Chrysler plan, senior lenders will only be entitled to 29 cents on the dollar, according to Automotive News.
The Indiana pension funds hold $42 million of Chrysler’s $6.9 billion debt.
The appeal also contends the U.S. Treasury Department didn’t have the authority to carve out auto bailout loans from the Troubled Assets Relief Program.
“Chrysler, however, can be saved without trampling the law and the rights of the first lien lenders,” White & Case lawyers representing the Indiana pensioners said in a statement. “In any case, the issues on appeal call on the Court to maintain the rule of law, even set against cries from others that the economy as a whole will benefit from the sale.”
OppenheimerFunds Inc., a once dissident Chrysler bondholder that withdrew its objections after it drew public fire, is also speaking out against the Chrysler sale. OppenheimerFunds says the sale “undermines well-established principles of United States bankruptcy law and threatens to destabilize American credit markets by subverting the equitable principles of creditors’ rights.” OppenheimerFunds holds $96 million of Chrysler’s secured debt.
Chrysler and the bankruptcy court claim the automaker is worth more alive than dead – that is in Chapter 7 liquidation – but it remains possible the appeal could block the sale to Fiat. Such a ruling would likely push Chrysler to the brink, unless a resolution could be quickly reached.
While it remains unclear how the appeals court will rule, one thing is for sure – General Motors will be closely watching the proceedings.
06/05, 9:03 AM
posted by:
Go Saab
Yeah, why not appeal all the way and lose all the jobs. Great thinking.
06/05, 9:28 AM
posted by:
RaineMan
They won’t gain anything by fighting. Obama has already said that he wants this to happen… so it will happen, period, end of discussion.
06/05, 9:30 AM
posted by:
Borat
It is screwed investors who are appealing. It happens that investors in Cerberus are pension funds of not UAW unions. They are taken for a ride. The irony is that UAW is a$$ f*cking other unions. Those who are screwed are screwed really bad – we are talking pensions, health benefits, widows and orphans….
06/05, 10:05 AM
posted by:
Payton Byrd
Borat is correct. Fortunately, Bush got some intelligent judges on the Supreme Court and I can see this going all the way. And I’m sure Chief Justice Roberts is chomping at the bit to give Obama his first reality check.
06/05, 10:41 AM
posted by:
johnnycanuck
This is worse than oral sex with a chick who never quite gets there. It was supposed to be a lick and a promise but to hell with the lick it’s time to light up.
06/05, 10:42 AM
posted by:
RaineMan
I don’t know if the Supreme Court would even take the case… risk being the target of even more public hatred for trying to impede the process that Obama has laid out. I believe we can throw the “checks and balances” rule of Govt. out the window where this whole economic mess is concerned. The sooner it is done and over with, right or wrong, good or bad, the sooner we can actually try to rebuild our economy. People are going to get hurt… toes are going to get stepped on… trampled over even… but every single one of those investors could have taken actions years ago to prevent this. Ford may not be in superb shape… but at least they made decisions that have kept their head above water thus far. If they did it, Chrysler and GM could have as well.
06/05, 10:53 AM
posted by:
Borat
Lionwithoutpride is more competent about judicial system then I ever will be, and I would love to read his comment on this. But whoever gets on Supreme Court will act responsibly. There are 9 judges and regardless of what your pedigree is you have to publish something reasonably good. Otherwise 8 others will be embarrassed to associate with you and court will be pushed in opposite direction of desired. Obama and hopefully Sotomayor will understand this and will preserve sanity of high court.
06/05, 3:35 PM
posted by:
slider5634
“risk being the target of even more public hatred for trying to impede the process that Obama has laid out. I believe we can throw the “checks and balances” rule of Govt. out the window where this whole economic mess is concerned. The sooner it is done and over with, right or wrong, good or bad, the sooner we can actually try to rebuild our economy. People are going to get hurt… toes are going to get stepped on… trampled over even… but every single one of those investors could have taken actions years ago to prevent this.”
Word. This is a damned if you do, damned if you don’t sort of situation. This sounds like a big case of “If we’re getting screwed on this deal, we’re going to try to screw you right back.” Regardless of what happens, they aren’t going to get all of their money back.
06/05, 3:37 PM
posted by:
slider5634
@myself
and honestly, I’d like to see this deal gho through if for nothing other than to get a good look at a new Fiat.
06/05, 4:27 PM
posted by:
rpiotr01
At a certain point it just looks vindictive. They’re not getting their original 48 cents on the dollar back. They’re screwed either way. They’re just trying to sink the ship for the hell of it.
If they win the appeal or lose and appeal to the Supreme Court, Chrysler and GM are liquidated. There would be no reason for any creditor to make a deal, they’ll continue the same process and get what they can through the asset fire sale.
06/05, 6:26 PM
posted by:
sprockkets
Can’t we let Chrysler die and just have Fiat sell there stuff over here, without the stupid Dodge badge on the front? Fiat should be smart enough to know that won’t help them one bit.
06/07, 8:25 PM
posted by:
slider5634
“Can’t we let Chrysler die and just have Fiat sell there stuff over here, without the stupid Dodge badge on the front? Fiat should be smart enough to know that won’t help them one bit.”
Not the point. The point of the sale to Fiat was so they could start selling Fiat’s here without having to build a dealer network of their own and risk failure.