Judge rejects opposition to Chrysler sale/Chrysler lenders end fight for better terms

Judge rejects opposition to Chrysler sale
By Nicole Bullock in New York and Bernard Simon in Toronto
Copyright The Financial Times Limited 2009
Published: May 6 2009 07:34 | Last updated: May 6 2009 07:34
http://www.ft.com/cms/s/0/b451539e-3a07-11de-8a2d-00144feabdc0.html


A US bankruptcy judge has rejected an attempt by dissident Chrysler creditors to derail the sale of the ailing carmaker’s viable assets to a group of new shareholders, including Italy’s Fiat.

In a ruling at 11pm EDT, Judge Arthur Gonzalez approved the process for the sale, which requires final court approval by May 27, as “appropriate and necessary”.

He overruled objections from a group of creditors who oppose the sale and who argued that the guidelines set out restrict competing bids. Lawyers for Chrysler said the Detroit automaker was a “wasting asset” that needed to be sold quickly to preserve jobs and the value of the company.

Chrysler is seeking to complete its restructuring within 60 days, emerging with a United Auto Workers union healthcare trust, the US government and Fiat as its main shareholders.

The opposition of dissident creditors, who call themselves the non-Tarp lenders, has dominated proceedings in the bankruptcy court since Chrysler filed for Chapter 11 protection last week.

Banks holding the bulk of $6.9bn in secured debt have accepted about 28 cents on the dollar in cash. But a group of about 20 investors, including Oppenheimer Funds and Stairway Capital, refused on the grounds that they were being strong-armed into concessions by the Obama administration.

They argue that the current deal strips them of their rights and runs counter to normal bankruptcy proceedings because it does not honor their senior claim on Chrysler’s assets.

The banks have received capital injections under Washington’s Troubled Asset Relief Programme, putting them under political pressure to accept Washington’s proposal.

The dissidents contended in a court filing that the proposed sale of Chrysler’s assets ”was orchestrated entirely by the Treasury and foisted upon (Chrysler) without regard to corporate formalities, the fiduciary duties of (Chrysler’s) officers and directors, or other important checks and balances typically found in good faith sales”.

They can still object as trial proceeds to final court approval.

During Tuesday’s hearing, the timeline for the sale was modified with key dates pushed back 5 to 6 days at the request of a separate committee of unsecured creditors. Bids now must be submitted by May 20, a lead bid chosen by May 26 and a final sale hearing take place by May 27.

Judge Gonzalez also ruled on Tuesday that the non-Tarp lenders must disclose their identities. They had earlier resisted on the grounds that some had received death threats.

The Chrysler bankruptcy proceedings are seen as a potential test case for the restructuring underway at its much larger and more complex rival General Motors.

GM has until the end of the month to agree with its bondholders on a way to slash substantially all of its $27bn in unsecured debt. The company has offered a 10 per cent equity stake, but bondholders want 58 per cent for their debt claim.






Chrysler lenders end fight for better terms
By Bernard Simon in Toronto
Copyright The Financial Times Limited 2009
Published: May 8 2009 23:29 | Last updated: May 8 2009 23:29
http://www.ft.com/cms/s/0/c051dfde-3c1d-11de-acbc-00144feabdc0.html?nclick_check=1


A group of Chrysler secured lenders gave up their fight for better terms under the ailing carmaker’s restructuring plan on Friday , but not before taking a parting shot at what they described as “unfair pressure” exerted by the Obama administration.

Tom Lauria, a lawyer representing the dissident group said that “after a great deal of soul-searching and quite frankly agony, [the] lenders concluded they just don’t have the critical mass to withstand the enormous pressure and machinery of the US government”.

The bankruptcy court overseeing Chrysler’s restructuring this week dismissed the group’s attempt to block the process that would allow the carmaker to emerge from Chapter 11 protection under the control of Italy’s Fiat, a United Auto Workers healthcare fund and the US and Canadian governments.

After earlier defections, the group holds only $295m of $6.9bn in Chrysler senior debt. The carmaker has offered to swap the total debt for $2.25bn in cash.

The four banks that hold the bulk of the securities – JPMorgan, Citigroup, Morgan Stanley and Goldman Sachs – accepted the offer under strong political pressure from Washington.

Their ability to resist was weakened by the fact that all four were recipients of billions of dollars of taxpayers’ money under the troubled assets relief programme (Tarp).

The dissidents described themselves as the “non-Tarp” lenders.

President Barack Obama accused the dissidents of forcing Chrysler into Chapter 11 bankruptcy protection on April 30.

A leading member of the dissident lenders, Stairway Capital, said on Friday: “We remain steadfast in our view that there should be significantly more value attained, given a normal course bankruptcy negotiation.

“The fact simply is, however, our group has become too small to have a voice within the bankruptcy.”

Chrysler is seeking to split itself into “old” and “new” companies with the “new” Chrysler emerging from Chapter 11 protection by July 1.

The bankruptcy court will decide on May 27 who will own the new company after a theoretical bidding process.

But with no other prospective buyers in sight, the carmaker will almost certainly end up in an alliance with Fiat.

Chrysler has closed almost all its plants during the restructuring period. It has warned that it will be unable to survive beyond July 1.