A Chrysler lenders group objected on Tuesday to the automaker's plans for a quick sale of most of its assets in U.S. Bankruptcy Court, saying it is structured to achieve political goals, rather than economic ones.
Chrysler, which filed for bankruptcy in Manhattan on Thursday, has asked for court permission for a quick sale of most of its assets to a new company held initially by Italy's Fiat SpA
A hearing into the sale procedures requested by Chrysler has been scheduled for Tuesday afternoon before Judge Albert Gonzalez. The automaker has asked for a required hearing into the proposed sale as soon as May 21.
The lender group said in court documents filed on Tuesday that the procedures were designed to prevent, not encourage, competitive bidding.
The group has asked the court to deny the sale as it is structured or require a substantial modification.
Through the sale procedures, the debtors in effect preclude anyone but the government from bidding on the debtors' assets, the group said in court papers. Accordingly, the sale procedures are inherently unfair and do not comply with the fundamental purpose for bidding procedures -- to maximize the sale price for the Debtors' assets.
Chrysler's first-lien lenders were owed a collective $6.9 billion stemming from the automaker's breakaway from Daimler AG in 2007.
Four large banks led by JPMorgan Chase & Co controlled about 70 percent of the first-lien debt and agreed to a government-approved plan that would provide the entire group with $2 billion cash.
However, a group of investment funds led by Oppenheimer Funds and Stairway Capital had objected to the payout terms as unfair. Chrysler's failure to restructure the debt was one of the reasons it filed for court protection last week.
The case is in re Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002.
(Reporting by Emily Chasan, writing by David Bailey, editing by Matthew Lewis)