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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowA bankruptcy judge yesterday denied a motion from a pair of Indiana 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 Italy’s 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 U.S. 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 U.S. 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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