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Mourdock Halts Sale To Fiat



INDIANAPOLIS (Indiana's NewsCenter) - Chrysler's sale to Fiat has come to an abrupt halt thanks to the treasurer of Indiana.

The sale was to be finalized Friday but that won't happen.

Instead, Indiana State Treasurer Richard Mourdock will be before the U.S. Court of Appeals.

He's fighting a bankruptcy court's decision to approve the sale, which gives unsecured creditors more money on their investment than secured investors.

Among them are two Indiana pension funds, and the major moves construction fund.

Mourdock says, “I can not express strongly enough how I hate doing what I am doing. But I took an oath, to follow the law, and it requires that I do this, so I will.”

The CEO's of Chrysler and GM will testify before a Senate Committee this afternoon about their plans to sever ties with thousands of dealerships.

LINK:Indiana's NewsCenter | Mourdock Halts Sale To Fiat | Fort Wayne, Indiana
 

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Circuit court agrees to hear

Circuit court agrees to hear Chrysler sale appeal

Posted Wednesday, Jun 3, 2009, 12:58 pm in Employee News

A U.S. Court of Appeals agreed on Tuesday to hear a challenge to Chrysler LLC’s sale of most of its assets to a group led Fiat, in a move that could potentially delay the deal, Reuters reported.

The federal circuit court granted a request by a group of Indiana pension funds that hold a small portion of Chrysler’s secured debt to “stay” the sale order to allow the circuit court to hear the expedited appeal, the news service said. A three-judge panel for the U.S. Court of Appeals for the Second Circuit will hear arguments in the appeal on Friday at 2 p.m. in New York City, according to a court order on Tuesday, the story said.

U.S. Bankruptcy Judge Arthur Gonzalez had ruled that the sale could become effective on Friday, bringing a “New Chrysler” out of bankruptcy, which will be owned by Fiat, the company’s union and the U.S. and Canadian governments, but that will now depend on the appeal, the story said. The Indiana pension funds have objected to the sale saying it violates traditional bankruptcy laws about the priority of repayment by favoring more junior creditors over senior secured creditors, the story said. (Reuters/Automotive News)
 

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Chrysler June 5 Sale Put on Hold

Chrysler June 5 Sale Put on Hold by Appeals Court (Update1)

June 3

Chrysler LLC’s plan to sell its best assets to a new entity on June 5 was put on hold by a federal appeals court that will hear arguments that day by creditors challenging terms of the deal.

U.S. Bankruptcy Judge Arthur Gonzalez in New York had said the sale to a group led by Fiat SpA could be completed at noon June 5. He moved the date up from June 15, noting in an order that Chrysler is losing $100 million a day as it awaits a sale designed to make it a viable company in world markets.

The Manhattan-based appeals court is to hear the challenge to terms of the sale by a group of Indiana pension funds at 2 p.m. and written arguments are due by noon tomorrow, the appeals court said in an order late yesterday.

“I expect they’ll lift the stay and let the sale close,” said Stephen Lubben, a bankruptcy-law professor at Seton Hall University in Newark, New Jersey. “I think the courts all understand that the consequences for Chrysler are dire if the deal with Fiat falls through.”

Indiana Treasurer Richard Mourdock said he was pleased the Court of Appeals agreed to hear state funds’ arguments that they and other secured creditors have been made secondary to government-preferred unsecured creditors “in contravention of longstanding bankruptcy law.”

“Indiana retirees and Indiana taxpayers have suffered losses because of unprecedented and illegal acts of the federal government,” Mourdock said today in a statement.

TARP Funds

Illegal acts include using Troubled Asset Relief Program funds, designated for aid to “financial institutions,” in the Chrysler sale, the treasurer said.

Gonzalez in approving the sale May 30 rejected objections, including those of the Indiana funds, that hadn’t been withdrawn.

“Not one penny of value of the debtors’ assets is going to anyone other than” lenders who deserve it, the judge wrote.

Separately, the Auburn Hills, Michigan-based automaker said it reached agreement with creditors resolving most objections to its resolution of a $10 billion pension gap.

The accord was reached with the federal Pension Benefit Guaranty Corp., Cerberus Capital Management LP and Daimler AG. Gonzalez set arguments on the settlement for later today.

Chrysler’s proposed sale would extinguish Daimler’s $1 billion guaranty securing the pensions, according to a court filing.

Daimler Contribution

Under the proposed settlement, Daimler will make $600 million in cash contributions to the pensions and reduce its guaranty to $200 million.

Daimler will also forgive a $1.5 billion loan to Chrysler, and Cerberus will forgive a $500 million loan, according to court papers.

In exchange for the payments, Chrysler, Cerberus and Daimler will waive all claims against one another related to Cerberus’s acquisition of most of Chrysler in 2007.

Gonzalez said he’ll hear arguments tomorrow on Chrysler’s bid to cancel agreements with 789 dealerships across the U.S. It was previously set for today.

When it emerges from court protection, Chrysler stakeholders will include Fiat, an association formed for employees and the U.S. and Canadian governments.

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

LINK:Chrysler June 5 Sale Put on Hold by Appeals Court (Update1) - Bloomberg.com
 
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