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 Judge Gonzalez.
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 approved.
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 Program.
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. economy worsened.
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.
(Additional reporting by Walden Siew and David Bailey; Editing by Matthew Lewis and Steve Orlofsky)