The 2 nd U.S. Circuit Court of Appeals heard an appeal filed by a group of Indiana state pension and investment funds, which had sought to block the deal (see Court Agrees to Hear Indiana Funds’ Chrysler Appeal). The carmaker’s proposed restructuring seeks to pay billions of dollars to unsecured Chrysler creditors, while paying secured creditors only 29 cents on the dollar
Previously, U.S. District Judge Thomas Griesa denied a motion by The Indiana State Teachers’ Retirement Fund, Indiana State Police Pension Trust, and Indiana Major Moves Construction Fund that the government did not have the authority to provide funds to Chrysler for its proposed sale. Griesa also denied a request to prevent Chrysler’s scheduled sale hearing in bankruptcy court from going forward
Chrysler had hoped to close the sale by the end of this week.
UPDATE The Wall Street Journal reports that late on Saturday, the Indiana pension funds – the Indiana State Teachers Retirement Fund, the Indiana State Pension Trust and the Indiana Major Moves Construction Fund – asked for an emergency stay request from the U.S. Supreme Court after the 2nd U.S. Circuit Court of Appeals in New York approved the acquisition of most of Chrysler’s assets by Fiat. Earlier the sale was approved last week by a U.S. bankruptcy judge. According to the WSJ, the stay requests asks for the extension of a temporary hold on the sale put in place by the appeals court until Monday at 4 p.m. EDT or when the high court decides whether to intervene.
“The court will be deprived of the opportunity to decide critical, nationally significant legal issues relating to management of the economy by the United States government,” the funds said in their stay request. “Chrysler’s bankruptcy carries profound implications for the nation’s economy. Nearly everyone will feel the impact.”
The pension funds have argued that the proposed sale to Fiat is unconstitutional because it puts the rights of junior creditors ahead of the rights of senior lenders.
The WSJ notes that emergency stays are rarely granted by the Supreme Court, but that if it were to be, the Chrysler deal with Fiat could be delayed for weeks or months while the issue is pending at the high court. That would buy time for the pensions and consumer groups to lodge a formal appeal at the high court, and the WSJ said both plan to file separate challenges in coming days.
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