Pension Funds Lose Effort to Stop Chrysler
Sale
August 6, 2009 (PLANSPONSOR.com) - The 2nd U.S.
Circuit Court of Appeals has decided that a U.S. Bankruptcy
Court judge properly allowed the sale of Chrysler LLC's
assets to Fiat SpA to move forward despite objections from
three pension funds.
The latest 2
nd
Circuit ruling follows up an earlier move by the appellate
court allowing the deal to move forward without issuing an
opinion.
The 2
nd
Circuit appellate panel said in its latest
pronouncement that The Indiana State Police Pension Trust,
the Indiana State Teachers Retirement Fund, and the Indiana
Major Moves Construction Fund were wrong to argue that
Chrysler's disputed auto manufacturing asset sale
actually represented an impermissible bankruptcy
reorganization plan (see
Indiana Pension Plans Lose Shot at Blocking Chrysler Asset
Sale
).
Without the Fiat sale, Chrysler's value could
continue to plummet. "[I]t was no abuse of discretion
to determine that the Sale prevented further, unnecessary
losses," the court said, according to BNA.
The court explained in its opinion, that under Section
363(b), Chapter 11 debtors-in-possession can use, sell, or
lease estate property outside the ordinary course of
business, with the theory being that it sometimes is more
advantageous for a debtor to begin selling as many assets
as soon as possible to ensure that the assets do not lose
value.
The common fear associated with these transactions is
that one class of creditors may strong-arm a
debtor-in-possession and bypass the requirements of Chapter
11 to cash out quickly at the expense of other stakeholders
in a proceeding that amounts to a reorganization in all but
name, so there must be a "good business reason"
for a Section 363(b) transaction, the court said, according
to BNA.
The 2nd Circuit opinion is
here
.
Fred Schneyer
editors@plansponsor.com