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Chrysler’s Creditors Get Another Day In Court
Courtesy of But Then What, by Tom Lindmark
It probably will amount to nothing but a federal court has agreed to hear an appeal by a group of aggrieved Chrysler creditors. Oral arguments are supposed to begin on Friday. Why does this matter? Because if the deal isn’t done by June 15, Fiat can walk.
From theWSJ:
The circuit court’s acceptance of the appeal is a small victory for Chrysler, however. Any appeals normally go first to a lower, district court. Going directly to the circuit court allows them to skip a step and speed up the process if the company prevails.
The deal must close by June 15 or Fiat can potentially walk away from the deal, Chrysler has said.
Neither Chrysler nor an attorney for the Indiana funds could be reached for comment.
The sale to Fiat was approved early Monday by the U.S. Bankruptcy Judge Arthur Gonzalez in Manhattan
He found the sale order should be heard by the U.S. Second Circuit Court of Appeals, saying that skipping the district-court level “is appropriate because this case involves a matter of public importance, and an immediate appeal may materially advance the progress of this case.”
The pension funds hold about $42 million of Chrysler’s $6.9 billion in secured debt. Secured debt is backed by the borrower’s assets and normally puts the lender at the front of the line for repayment.
The Indiana pension funds — the Indiana State Teachers Retirement Fund, the Indiana State Pension Trust and the Indiana Major Moves Construction Fund have argued the sale of Chrysler is unconstitutional, saying the plan upends the rights of senior lenders to be paid off before junior creditors.
The Indiana funds also contend that the U.S. Treasury Department doesn’t have the authority to lend bankruptcy financing under the Troubled Asset Relief Program because Chrysler isn’t a financial company.
You never know what’s going to happen once you get into the judicial system. Odds are that Chrysler prevails and everything proceeds according to schedule. But all it takes is one piece of paper, one memo or email that shouldn’t have been written and wham, bam the whole thing blows up on you.
