A U.S. bankruptcy judge approved bidding procedures for the rapid
sale of most of Chrysler's assets, over objections from a group of
lenders who called the accelerated timetable an absurdity.
Judge Arthur Gonzalez, who is overseeing Chrysler's bankruptcy case
in Manhattan, said late on Tuesday, the proposed procedures were
appropriate and necessary given that there is evidence that there is
an urgent need for the deal to be consummated.
The U.S. automaker, which filed for bankruptcy in New York on April
30, had asked for permission for a quick sale of most of its assets to
a new company held by Italy's Fiat SpA, a United Auto Workers
union-aligned healthcare trust and the U.S. and Canadian governments.
Time is not our friend here, said Corinne Ball, Chrysler's
bankruptcy attorney, at the hearing. Preservation of value means
moving ahead of this sale.
The company's net cash balance has fallen to $260 million, from
$1.34 billion over the last three months, said Robert Manzo, of
Capstone Advisory Group, which is advising Chrysler.
The ruling came over the objections of a lender group, which had
asked the court to block Chrysler's efforts to sell itself, or modify
its bidding process to make it more competitive. They said the current
sale procedures preclude anyone but the government from being able to
bid on Chrysler's assets.
But courtroom testimony demonstrated that the bidding procedures
are intended to encourage bidding from any interested party, said
Chrysler also asked the court to approve a $35 million breakup fee
paid to Fiat should a better offer for Chrysler emerge. The request was
Earlier in the hearing, Judge Gonzalez ruled that a small group of
Chrysler's lenders who have objected to the Obama administration's plan
for a quick dash through bankruptcy must identify themselves, in spite
of death threats.
These lenders do not have grounds for (their identity) statement to
be sealed, Gonzalez said at the court hearing, saying threats on the
Internet did not meet the bar for such a request and that concerns
about reputational harm were not subject to protection by the court.
The ruling opens the possibility that some may change their minds.
Chrysler's first-lien lenders were owed a collective $6.9 billion
stemming from the automaker's breakaway from Daimler AG in 2007. About
70 percent of the debt was held by the four large banks, all of which
received support under the U.S. government Troubled Asset Relief
A dissident lender group holds about $330 million of secured Chrysler debt.
The group, which calls itself the company's non-TARP lenders, says
its members have taken no bailout money from the government and that
the four large banks that agreed to the Chrysler bankruptcy plan do not
represent their interests due to of their participation in the
government support program.
Lawyers representing the group also said in court papers on Tuesday
that the plan would subvert time-honored bankruptcy principles and
prevent the automaker's creditors from getting a fair return.
Chrysler executive Scott Garberding said in court on Tuesday that
Chrysler had explored tie-up deals with Nissan and General Motors prior
to the current proposed deal with Fiat, but they fell apart as the U.S.
Chrysler had concluded in its negotiations with Fiat that Fiat had
opportunities for its cars at Chrysler dealerships in the United States
and that Chrysler could benefit from Fiat's Latin American dealer
network, Garberding said.
In the U.S. it gives Chrysler access to small, power trains, it
gives Chrysler access to a couple of small vehicle platforms that would
otherwise be very expensive to develop, said Garberding, who is chief
procurement officer at Chrysler.
Chrysler attorney Ball asked the court to set a deadline for
possible bids on the company for May 20. She also asked for a deadline
for a sale hearing on May 27.
Another group of the company's creditors on Tuesday also set the
stage to begin playing a larger role in the case. An eleven-member
committee of Chrysler's unsecured creditors' hired law firm Kramer
Levin Naftalis & Frankel LLP to represent it in the case.
The case is In re: Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002.