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Chrysler Fiat Sale Delayed By U.S. Supreme Court

Justice Ruth Bader Ginsburg issues a terse stay order.

by on Jun.08, 2009

U.S. Supreme Court

"To block the sale would force the liquidation of Chrysler, a step whose economic consequences would be so severe that two national governments have committed unprecedented resources to prevent it. Granting applicants that form of relief would be manifestly contrary to the public interest."

Using her emergency powers, Supreme Court Justice Ruth Bader Ginsburg put Chrysler’s sale to Fiat on temporarily hold this afternoon just before 4 pm, while the court considers a request by the State of Indiana to review the case and ultimately block the sale.

Late last Friday, the U.S. Court of Appeals for the Second Circuit in New York City said the sale of Chrysler to Fiat SpA could proceed this Monday afternoon unless the Supreme Court intervened by 4 pm.

Chrysler could be losing as much as a $100 million a day as the bankruptcy drags on.

The Supreme Court now has the option to consider the case, and nothing can happen “pending further order” of the Court. The U.S. Supreme Court rarely hears emergency appeals, such as the one coming from Indiana.

A three-judge appeals panel for the Second Circuit dismissed arguments against the Fiat sale from the State of Indiana Friday afternoon, which holds a tiny portion of less than 1% of Chrysler’s debt. This led to today’s request by Indiana that the Supreme Court overturn two lower Federal Courts.

In a brief filed this morning for Ginsburg, the U.S. Solicitor General for the Department of Justice, Elena Kagan, defended the Fiat sale, claiming that creditors would get $2 billion in cash, or 29 cents per dollar of debt, compared with only $800 million in a liquidation that will occur if the Fiat sale falls through. Fiat has given a deadline of June 15th for the transaction to occur, otherwise it will withdraw its offer. (more…)

Chrysler Sale to Fiat Upheld by U.S. Appeals Court!

Fiat sale is approved again. Objecting debtors say the U.S. Supreme Court is next stop. Outcome will likely be the same.

by on Jun.05, 2009

Court of Appeals Second CircuitThe U.S. Court of Appeals for the Second Circuit in New York City said the sale of Chrysler to Fiat SpA can proceed next Monday unless the Supreme Court intervenes by 4 pm.

A three-judge panel dismissed the arguments from the State of Indiana Friday afternoon, which holds a miniscule portion of less than 1% of Chrysler’s debt.

The outcome was predictable. And it is likely the Supreme Court will allow the Chrysler sale to proceed next week. Justice Ruth Bader Ginsburg handles appeals from the Second Circuit. She has the power to dismiss the appeal outright. She can also present the matter to the entire court. The U.S. Supreme Court rarely hears emergency appeals, such as the one coming from Indiana.

In the Bankruptcy Court decision that was immediately appealed by Indiana, the presiding judge cited Congressional laws going back to the 19th century to dismiss the dissident bondholders’ claims.

Now the Appeals Court has upheld the Chrysler sale decision, which allowed the sale to proceed just 31 days after the case was filed. The original decision applies basic and well-known fundamental principles of bankruptcy law.

As a result, Fiat will get the assets related to the research, design, manufacturing, production, assembly and distribution of passenger cars, trucks and other vehicles, including prototypes, under brand names that include Chrysler, Jeep and Dodge. The New Chrysler Group will be largely free of previous obligations, allowing it in theory to make a profit at current depressed sales levels.

Both decisions use common sense and law to dismiss arguments from lawyers for the debtors. Simply put, a sale of Chrysler, backed by funding from U.S. taxpayers, is the only way to give Chrysler a chance – and it is just a chance – to survive. This “preserves the estate,” allowing the largest possible settlement for all involved, including bondholders. No other bidders for Chrysler emerged during the 363 sale process, which is named for the section of the U.S. Bankruptcy code that describes the procedure.

In his 47-page decision Judge Gonzales wrote: “the Court finds that all relevant standards have been established to grant the relief requested (the sale of Chrysler to Fiat).  All objections, if any, to the Sale Motion or the relief requested therein that have not been withdrawn, waived, or settled as announced to the Court at the Sale Hearing or by stipulation filed with the Court, and all reservation of rights included therein, are hereby overruled.”

The swiftness of the disposition of the Chrysler matter not only confounded critics and pundits, but  the precedent makes it easier for the more complicated General Motors bankruptcy to proceed along the same legal lines. Senior Obama Administration officials maintain that a New GM will emerge from bankruptcy 60-90 days after its June 1 filing.

Chrysler Sale to Fiat Put Temporarily on Hold

U.S. Appeals Court to Hear objecting creditors this Friday.

by on Jun.03, 2009

Indiana State Treasurer Richard Mourdock

Is Mourdock running for re-election on the tails of an industrial tragedy?

At the same time Chrysler LLC was supposed to be proceeding with its sale to Fiat SpA on June 5th as approved by the U.S. Bankruptcy Court in New York, objecting creditors will be arguing their case yet again in the U.S. Court of Appeals for the Second Circuit in New York City.

The appeal was expected from the State of Indiana, which holds a miniscule portion of Chrysler debt, less than 1%, in retirement funds, and the outcome will likely be the same — the Chrysler sale will proceed some time next week.

“We are pleased the Court of Appeals has agreed to hear our arguments,” explained State Treasurer Richard Mourdock. “As we have stated from the beginning, Indiana retirees and Indiana taxpayers have suffered losses because of unprecedented and illegal acts of the federal government.”

In the Bankruptcy Court decision of Judge Gonzales, he cited Congressional laws going back to the 19th century and their subsequent revisions, to dismiss dissident bondholders’ claims. Simply put, the Chrysler sale decision revolves around basic and well-known fundamental principles of bankruptcy law.

Under the decision, Fiat will get the assets related to the research, design, manufacturing, production, assembly and distribution of passenger cars, trucks and other vehicles, including prototypes, under brand names that include Chrysler, Jeep and Dodge. (more…)