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Chrysler-Fiat nears reality
Indiana pension fund's objections are put aside by appeals court. Troubled automaker moves closer to deal with Italian company.

Last Updated: June 5, 2009: 5:03 PM ET

NEW YORK An appeals court Friday upheld Chrysler LLC's plan to exit bankruptcy.

The new company will be owned jointly by the U.S. government, an autoworker's union retiree fund and the Italian Automaker Fiat.

The deal will go through on Monday afternoon unless the Supreme Court intervenes, Chrysler attorney Corinne Ball told CNN.

Indiana Treasurer Richard Mourdock had appealed the ruling of a federal bankruptcy court on May 31 allowing Chrysler to sell its best-performing assets, including factories and dealerships, to a new company called the Chrysler Group.

Mourdock made his appeal was on behalf of three pension funds -- for Indiana teachers and state police, as well as a "Major Moves" construction fund. The funds hold about $42 million, or less than 1%, of Chrysler's $6.9 billion debt.

The automaker has been trying to leave behind its debt as part of the Chapter 11 process, which would wipe out part of the pension fund's holdings. It filed for Chapter 11 on April 30.

The Chrysler Group would be comprised by several major stakeholders. The biggest share, of 55%, would be controlled by a United Auto Workers union trust. The Italian automaker Fiat would own 20% initially, though this share could eventually increase. A minority stake of 8% would go to the U.S. government, and 2% would be held by the federal and provincial governments of Canada and Ontario.

Mourdock said the pension funds are secured creditors and therefore they deserve a place at the table. White & Case, the prominent law firm representing his appeal, is arguing that the bankruptcy court ignored various legal points in approving the asset sale.

Chrysler's asset sale was approved just hours before bankruptcy filing of General Motors (GMGMQ) on June 1.

Article Link:Chrysler wins appeals court ruling paving way for Fiat deal - Jun. 5, 2009

The Big Three automakers have been hammered in the last of couple years by rising fuel prices, the drying-up of bank loans to customers, and a recession that has severely hampered consumer spending. To top of page
 

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Update

The three-judge panel delayed the Chrysler sale until 4 p.m. on Monday, June 8, or until the Supreme Court says the sale shouldn’t be delayed. The judges affirmed the decision of the U.S. Bankruptcy Court, which said the only alternative to the sale was liquidation of the company. The Appeals Court will issue an opinion later, explaining their ruling.

Article Link:Chrysler Appeals Court Refuses to Block Sale to Fiat (Update3) - Bloomberg.com
 

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Why Indiana Funds

Why Indiana Funds Can't Yet Accept Chrysler Bankruptcy
June 07, 2009 6:51PM
Categories: Pension Actuarial

The Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund and the state's Major Moves Construction Fund filed a last-ditch appeal with the U.S. Supreme Court today in a bid to block Chrysler from selling its good assets out of bankruptcy court to a group headed by Italy's Fiat SpA claiming the deal unfairly favors the interests of the company's unsecured stakeholders ahead of those of secured debt holders such as themselves.

A lot of investors will lose money from the Chrysler implosion. Why is it that these Indiana funds took legal action?

Because it's taxpayer money they'll be losing that they can't afford to lose.

The Indiana Teachers Retirement Fund as of June 30, 2007 had $8.5 billion in assets to cover $18.8 billion in liabilities, at 45% one of the worst official funded ratios in the nation. With the subsequent market drop and these further bad investments bankruptcy for this plan may not be far off putting the pensions of 140,000 Indiana teachers at risk.

In 2006, Indiana entered into an agreement to lease the operation of the Indiana Toll Road for 75 years in exchange for $3.8 billion and set up the Major Moves Construction Fund. The sale was controversial then but, with a substantial loss in fund earnings, can only be viewed as an utter failure now.

There are parallels to New Jersey. In 2007 Governor Corzine was throwing out the idea of "monetizing" the Turnpike using Indiana as a model. In March, 2009, days after a pension deferral scheme was passed by the legislature, the state sued Lehman Brothers contending that fraud and misrepresentation had caused the state's public pension fund to lose $118 million.

Both Indiana and New Jersey would be far better off financially right now if they honestly faced up to problems when they developed instead of sloughing off responsibility for funding pensions and paying bills through gimmicks or patent indifference. Both have so swelled their budgets with debt that diminished revenues can't begin to cover the bloat anymore and all that's left for them is to CYA (Call Your Attorney, for one).

LINK:Why Indiana Funds Can't Yet Accept Chrysler Bankruptcy - John Bury
 
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