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Chrysler Bankruptcy Proceeding Apace

Court approves process for transaction with Fiat and creation of a new Chrysler. Dissident creditors withdraw.

by on May.08, 2009

NY Bankruptcy Court Seal

The order is signed, and unless another bidder emerges, the Fiat takeover is about to be sealed and delivered.

The U.S. Bankruptcy Court in Manhattan has just entered an order approving a process for the sale of virtually all of Chrysler’s assets. Unless an alternative offer arises, the deal with Fiat will proceed before 60 days have expired from the original April 30, 2009 filing, as the U.S. Treasury Department maintained.

In a clear victory for Main Street, the dissident creditors that were singled out as speculators by President Obama last month also withdrew from the proceedings today. The law firm representing these parties — after months of unsubstantiated claims about how much debt was held, along with an ongoing refusal to reveal what firms held the debt, all the while trying the case in the media — met the real court.  

Earlier this week, Judge Gonzalez ordered White & Case, the law firm representing the dissident debtholders, to reveal who their clients were, what debt they actually held, and how much they paid for it.

“After a great deal of soul-searching and quite frankly agony, Chrysler’s Non-TARP lenders concluded they just don’t have the critical mass to withstand the enormous pressure and machinery of the U.S. government,” said Tom Lauria, the White & Case attorney representing the group. “As a result, they have collectively withdrawn their participation in the court case.”

Hastening the withdrawal, no doubt, was the fact that the group had nowhere near the secured debt that news organizations such as the New York Times or the wire services were publicizing. As a famous jurist once postulated “sunshine is the best disinfectant.”

The momentum for an early resolution of the Chrysler matter now appears to be overwhelming, since the substantial new financial commitments from the U.S. and Canadian governments require the consummation of a transaction with Fiat within 60 days and make Debtor in Possession financing available for only that period.    (more…)