Chrysler Sale to Fiat Moves to Higher Court
A federal appeals court agreed late Tuesday to hear an appeal of Chrysler’s sale to Fiat, after a lower court judge approved the move to help expedite the process.
The 2nd U.S. Circuit Court of Appeals, in Manhattan, has scheduled a hearing for 2 p.m. Friday after Judge Arthur J. Gonzalez of the federal bankruptcy court ordered that the case be sent directly to the appellate bench.
Normally, appeals to bankruptcy court decisions are first heard in U.S. District Court, which sits directly above U.S. Bankruptcy Court in the judicial hierarchy. But cases may be moved directly to the appeals court if a judge finds it necessary. Lawyers for Chrysler had also sought the move.
“This case involves a matter of public importance, and an immediate appeal may materially advance the progress of this case,” Gonzalez wrote in his order.
As part of its decision to hear the case, the appeals court delayed the closing of the sale, meant to transfer most of Chrysler’s assets into a newer, healthier company.
The appeal was filed by lawyers for a group of Indiana pension funds, which objected to the sale because they were seeking more compensation for the Chrysler secured debt they hold.
Lawyers for Chrysler and the government argued that the sale to Fiat needed to be completed as quickly as possible to preserve its viability and to save thousands of jobs. Fiat can walk away if no agreement is struck by June 15, although that deadline can be pushed back by one month to allow for certain regulatory approvals.
Late Sunday, Gonzalez approved the sale to Fiat, overruling more than 300 objections. On Monday night, he agreed to shorten a customary 10-day stay of the sale to four days, allowing Chrysler to complete the transaction by Friday at noon.
When Chrysler emerges from bankruptcy, it will have a new ownership structure, with a union retiree trust owning 55 percent, Fiat holding a 20 percent share that could eventually grow to 35 percent and the U.S. and Canadian governments taking minority stakes.
The Indiana funds making the challenge, which include those representing state teachers and police officers, hold about $42.5 million of Chrysler’s $6.9 billion in first-lien debt, so called because it is first in line for repayment. But holders of about 92 percent of those loans agreed to a government plan whereby they would receive 29 cents on the dollar in cash for their claims.
Lawyers for the funds have questioned whether Chrysler could have realized a better deal than the Fiat transaction or through a liquidation. They have also raised objections to the sale on constitutional grounds, arguing that the Obama administration was not allowed to give bailout money earmarked for financial institutions to Chrysler.
A hearing on Chrysler’s motion to cut those dealers, which was scheduled for Wednesday morning, was postponed until Thursday.