High court puts Chrysler sale on hold

Maybe plain English "secured creditor" actually means what it says and
not what Chrysler and the UAW want it to say.

High court puts Chrysler sale on hold
http://tinyurl.com/nd43d4

Supreme Court issues a stay of the sale of Chrysler to the Italian
automaker, delaying Chrysler's exit from bankruptcy.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: June 8, 2009: 6:19 PM ET

NEW YORK (CNNMoney.com) -- The Supreme Court threw a wrench into the
plans to have a quick bankruptcy process at Chrysler LLC, delaying the
company's combination with Italian automaker Fiat.

The bankruptcy judge overseeing the Chrysler case had given approval for
the company's most valuable assets, such as plants, dealerships and
contracts, to become part of a new company in which Fiat would hold a
significant stake.

Supreme Court Justice Ruth Bader Ginsburg, in an order issued late
Monday, granted a request for a delay of that approval sought by Indiana
state pension funds, which had argued that they and other lenders
deserved better treatment by the bankruptcy court.

No reason for the delay was given in the order, and there were no
details about how quickly the issue could be resolved by the nation's
highest court.

Thomas Goldstein, a partner at law firm Akin, Gump, Strauss, Hauer &
Feld and the founder of Scotusblog.com, which tracks Supreme Court
cases, said Ginsburg's decision gives the court more time to decide
whether to hear the case and consider arguments being made by the two sides.

Without the order, a lower-court stay would have expired at 4 p.m. Monday.

"All you can say with confidence is that they're taking a hard look at
it, which isn't shocking" he said. "This is just an opportunity to think
it through before they allow the irreversible sale to go forward."

Goldstein said he expects the court will decide within a day or two to
take up the case or let the bankruptcy court's decision allowing the
sale to take effect.

If the court decides to hear the case, it can act very quickly and will
likely need to since Fiat has given Chrysler a deadline of June 15 to
close the deal.

The Obama administration has stated that Chrysler is no longer viable as
a standalone company and that it must join with Fiat in order to justify
additional federal tax dollars needed to keep the company alive.

Chrysler's top executives have argued in court filings that a long delay
in approving a deal with Fiat could kill the company by forcing its
suppliers to go out of business and leaving dealers without the parts
they need to repair Chrysler vehicles on the road.

Chrysler said it had no comment about the Supreme Court's ruling. Fiat
could not immediately be reached for comment.

Indiana state Treasurer Richard Mourdock told CNNMoney.com Monday
morning that it was important to protect secured lenders, including
three of his state's public employee pension funds, which have a
priority in bankruptcy cases to recover debts owed to them.

The three Indiana funds loaned $42 million to Chrysler and would recover
only 29 cents on the dollar under the proposed Fiat-Chrysler deal.

Mourdock also argued that the Treasury Department should not have been
allowed to use money in the Troubled Asset Relief Program, or TARP, to
help Chrysler and General Motors (GMGMQ) reorganize.

The Treasury Department also had no immediate comment. But in a filing
Monday U.S. Solicitor General Elena Kagan, arguing for the
administration, said the losses to the Indiana pension funds "cannot
outweigh" the potential broader problems a collapse of Chrysler would
present.

"As an economic matter ... blocking the transaction would undoubtedly
have grave consequences," Kagan wrote. "Even if the stay were continued
for a short time and Fiat did not withdraw from the transaction, the
consequences of delay for both Chrysler and the United States government
would far outweigh any benefit to applicants."

Kagan cited estimates that Chrysler is losing $100 million per day.

One auto industry consultant, who spoke on condition that his name not
be used, said that if the case drags on for even a few weeks and
Chrysler is unable to restart its plants by the end of the month as
planned, it could spell doom for Chrysler.

The consultant said such a delay could cause widespread bankruptcies
among its suppliers. But the consultant added that Chrysler could get
additional government money to sweeten its offer to creditors in order
to ensure that a deal goes through -- even if the Supreme Court decides
to hear the case.
Decision could have implications for GM

Some bankruptcy and auto industry experts said Monday that the Supreme
Court action could cause problems for General Motors' own bankruptcy case.

GM filed for bankruptcy on June 1 and also planned to have a quick trip
through bankruptcy court.

"The GM reorganization is now in serious trouble," said Jerry Reisman, a
Long Island bankruptcy lawyer. "If the Chrysler creditors win this case,
the GM lenders are going to smell blood and try to do the same thing."

GM spokesman Greg Martin, when asked by CNN if similar lawsuits could
hinder its bankruptcy plans, said the company was "surprised" by the
ruling, but added that "absent additional information from the Court to
better understand the reason for the stay, I'm not sure we have enough
to comment on."

But Jeremy Anwyl, CEO of auto research firm Edmunds.com, said GM and
Treasury might not have been as willing to use bankruptcy as a way to
reorganize the company if they had known the Supreme Court might slow
the process.

On the day of GM's bankruptcy filing, President Obama pointed out how
quickly the Chrysler bankruptcy case was moving along as proof that GM
would be in and out of court within 90 days.

"As George W. Bush learned from his 'Mission Accomplished' debacle,
there's always a danger in declaring victory prematurely," Anwyl said.

CNN's William Mears and Ekin Middleton contributed to this report. To
top of page

 

FIAT: Off the hook as of June 16th; breathes a sigh of relief...

Cerberus: Pooched!

 

It was never going to be a "sale" in the first place. Chrysler handing
over some of it's shares to Fiat is not a "sale".

Why are people calling this a sale?

The fed gov't would own more of Chrysler than Fiat would.

Fiat was never "on the hook". Fiat was never going to hand over any
cash over this in the first place.

Cerberus's interest in Chrysler was already in the toilet before this
share-giveaway to Fiat.

Nothing changes for Cerberus.

What changes now is that Chrysler may actually get liquidated, and
Cerberus may actually get 10 cents on the dollar now, instead of nothing
in the foreseeable future.

 

LOL.

Make sure to post back when you finish drafting the SCOTUS and US
Bankruptcy Court opinions. Remember, format counts.