U.S. automaker Chrysler LLC won interim court approval on Monday to access a $4.5 billion bankruptcy loan from the U.S. and Canadian governments, pushing it further along toward its planned sale to Italy's Fiat SPA
Chrysler asked the U.S. Bankruptcy Court on Monday for a swift hearing into its planned sale, eliciting immediate objections from some secured lenders.
Chrysler filed for bankruptcy on Thursday, planning an emergence from court protection in as little as 30 days under the guidance of Obama administration officials. It has asked for the sale to be completed as soon as May 21.
The company plans to sell its best assets into a new company owned by its union, Fiat and the government. United Auto Workers President Ron Gettelfinger said on Monday the union's healthcare trust would expect to sell its stock interest in Chrysler as quickly as possible.
The Chrysler bankruptcy, one of the biggest U.S. company bankruptcies ever, is widely seen as almost a dry run for a potential General Motors Corp
The bankruptcy came after some secured lenders to Chrysler declined to restructure its debt at a deep discount, which made them a target for criticism, though the automaker lost $16.8 billion in 2008 and expects to lose $4.7 billion in 2009.
A lawyer representing the dissenting lenders, told a packed courtroom on Monday that some of the lenders who were publicly identified have received death threats. Those dissenters also have objected to the sale and government bankruptcy financing.
Chrysler asked Judge Arthur Gonzalez to set a hearing as soon as May 21 to approve a $2 billion sale of most of its assets out of bankruptcy that would clear the way for a merger with Fiat, according to documents filed with the court.
Gonzalez approved Chrysler's request to access the funds, known as debtor-in-possession financing, as well as requests for the company to pay essential suppliers, dealers and its taxes. Gonzalez adjourned a hearing into Chrysler's requested sale procedures until 3:30 p.m. EDT on Tuesday.
We still have a very fragile coalition to get from here to there, Corinne Ball, Chrysler's bankruptcy lawyer, said near the start of a court hearing on Monday.
Fiat would start with a 20 percent stake in the new Chrysler, which would grow quickly to 35 percent.
Fiat Chief Executive Sergio Marchionne is expected to run the merged operations.
In court documents, Chrysler also asked the Bankruptcy Court to approve a $35 million breakup fee for Fiat if the sale deal falls apart.
The automaker has shut down all of its plants for the reorganization and the longer Chrysler lingers in Bankruptcy Court, the greater the damage to the surviving operation.
Absent a prompt sale, approved in the coming weeks, the value of the debtors' assets will rapidly decline and the ability to achieve a going concern sale will be lost, Chrysler said in court documents supporting the sale to Fiat.
Even without an extended shutdown, Chrysler expects delays of up to six months in the launch of a redesigned Jeep Grand Cherokee for the 2011 model year. It expects the availability of replacement parts to be restricted within weeks as well.
Chrysler salaried employees are being required to take two weeks of unpaid vacation.
I think that it is very realistic to sell assets and get that done in a very short period of time, but that won't solve the bankruptcy case entirely, Sheryl Toby, an attorney with Dykema Gossett in Bloomfield Hills, Michigan, told Reuters on the sidelines of an event in New York.
Toby, who has worked on auto industry cases for 20 years, said other issues such as those surrounding dealers and suppliers will be discussed for extended periods.
DISSENTERS THREATENED - LAWYER
The U.S. automaker, which has been operating with $4 billion of emergency U.S. government loans, failed to reach a deal with all of its secured first-lien lenders last week to restructure its debt, forcing Chrysler into the courts.
The decision by some lenders to hold out set off a political firestorm.
President Barack Obama called the holdouts speculators who hoped for a better deal from the U.S. taxpayer, and Michigan lawmakers threatened to pull state business from them.
Tom Lauria, an attorney at White & Case who represents an ad-hoc group of the dissenting secured lenders, told the court that publicly identified group members had received death threats which they perceive as being bona fide.
As a result, the group will seek to disclose its membership to the court under seal on Tuesday, Lauria said. Lenders who received death threats have notified police and the FBI, he said.
The first-lien lenders were owed a collective $6.9 billion, and four large banks led by JPMorgan Chase & Co
A group of investment funds led by Oppenheimer Funds and Stairway Capital had objected to the payout terms as unfair and filed an immediate objection on Monday asking Gonzalez to block the Fiat deal and the government's offer to provide bankruptcy financing to Chrysler.
JPMorgan lawyer Peter Pantaleo, of Simpson Thacher & Bartlett LLP, told the court Chrysler had 90 percent of the debt agreed, more than enough to support the sale.
The $2 billion payout would amount to about 29 cents on the dollar, but a liquidation analysis prepared by an adviser to Chrysler suggested the payout could be as little as 9 cents on the dollar if the automaker were forced to liquidate.
Chrysler has 30 plants in the United States, Canada and Mexico. Five assembly plants, a stamping plant, an engine plant and an axle facility in the United States were expressly excluded from the planned sale.
One plant, Sterling Heights Assembly in suburban Detroit, builds midsize Chrysler Sebring and Dodge Avenger cars.
The case is in re Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002.
(Reporting by Kevin Krolicki, David Bailey, Emily Chasan, Chelsea Emery and Phil Wahba; editing by Dave Zimmerman, Matthew Lewis and Carol Bishopric)