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from a pair of
state pension funds and a state construction fund to delay the proposed sale of
most of Chrysler’s assets, saying the funds’ plan to challenge the legality of
the sale in another court wasn’t enough of a reason to push back the
proceedings.
U.S. Judge Arthur Gonzalez said that attorneys representing the funds failed to
show that the group’s claims would suffer irreparable harm if the sale hearing
was not delayed, while also noting that an expedited sale is key to Chrysler’s
survival.
Auburn Hills, Mich.-based Chrysler plans to sell the vast majority of its
assets to a group led by
Fiat Group SpA and form a new company, leaving behind many of the liabilities
and costs that had sent it into bankruptcy protection. A sale hearing is
scheduled for May 27, with the deal expected to close about 30 days later.
Without the sale, the
government had been unwilling to offer the billions of dollars in bankruptcy
financing that the company needed to restructure itself.
The Indiana State Teachers Retirement Fund and Indiana State Police Pension
Trust, along with the Indiana Major Moves Construction Fund, filed an objection
to the proposed sale, saying the deal as currently structured gives
preferential treatment to other stakeholders in the case while ignoring the
needs of Chrysler’s secured lenders.
Indiana Treasurer Richard Mourdock said the Obama
administration has changed long-standing investment rules in the bankruptcy
proceedings, causing the police pension fund to lose $147,400 and the road
construction fund managed by Mourdock’s office to lose $896,000. The teachers
fund pegged its losses at about $4.6 million.
Those losses are a small sliver of the overall value of the funds – the police
fund holds about $350 million, the road fund $2.5 billion and the teachers’
fund $6.9 billion.
In the meantime, the funds want a U.S. District Court judge to decide
whether the sale of Chrysler’s assets to Fiat is legal.
Thomas Lauria, an attorney representing the funds, said a review by the
district court is needed given the unprecedented involvement of President
Barack Obama’s administration in the case.
“It’s not just any old bank that’s funding these transactions; it’s the
government,” Lauria said in court.
Lauria previously represented a dissident group of Chrysler bond holders who
had also sought to block the sale to Fiat, claiming that it didn’t treat
secured lenders fairly. The group dissolved earlier this month after its
remaining members decided that it had become too small to be effective.
Attorneys for Chrysler argued that delaying the proceedings would only hurt
Chrysler. In addition, they said the actions in district court were unnecessary
because the issues brought up by the pensions funds group could and should be
dealt with in bankruptcy court.
Earlier in yesterday’s hearing, Gonzalez gave final approval to a Chrysler
motion to use $4.96 billion in government loans designed to keep the automaker
going until the sale to Fiat goes through.
Gonzalez had given Chrysler interim approval to the use of part of the
government’s $4.1 billion in financing earlier this month. Chrysler also had
the use of another $400 million in cash.
But now, the government will also lend Chrysler $600 million to cover potential
losses incurred by GMAC Financial Services related to Chrysler loans and $260
million to replace funds transferred to its Canadian operations.
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