Chrysler asked the U.S. Bankruptcy Court on Monday for a swift
hearing into its planned sale to Italy's Fiat SpA, 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
The Chrysler bankruptcy, one of the biggest U.S. public company
bankruptcies ever, is widely seen as almost a dry run for a potential
General Motors Corp reorganization as GM faces its own restructuring
deadlines on June 1.
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 adjourned a hearing into Chrysler's requested sale procedure until 2:30 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.
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.
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.
DISSENTERS THREATENED - LAWYER
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
A lawyer representing a group of the dissenters told the court on
Monday that some who had been identified publicly had received death
The first-lien lenders were owed a collective $6.9 billion, and four
large banks led by JPMorgan Chase & Co that controlled about 70
percent of the debt had approved a plan to take $2 billion cash.
JPMorgan lawyer Peter Pantaleo, of Simpson Thacher & Bartlett
LLP, told the court Chrysler had 90 percent of the debt agreed, more
than the required support from secured lenders to support the sale.
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.
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.
The dissenting secured lenders said in their objection that the sale
was being orchestrated entirely by Treasury and foisted upon the
debtors without regard to corporate formalities.
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 may seek to disclose its membership to the
court under seal, Lauria said. Lenders who received death threats have
notified police and the FBI, he said.
Chrysler has 30 plants in the United States, Canada and Mexico and the sale plan excludes several U.S. plants.
Those excluded plants include Sterling Heights Assembly in suburban
Detroit where the automaker builds Chrysler Sebring sedans and
convertibles and the Dodge Avenger.
Chrysler's St. Louis North and South assembly plants also are
excluded from the sale. It builds Dodge Ram pickup trucks in St. Louis,
but also assembles them elsewhere.
The automaker's Newark Assembly plant in Delaware and Conner Avenue
Assembly plant in Detroit were also excluded, as were its Twinsburg,
Ohio, stamping plant, an engine plant in Kenosha, Wisconsin, and the
Detroit axle facility.
Chrysler expects Sterling Heights, Kenosha and Detroit Axle to run for a substantial period after the sale is completed.
The case is in re Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002.