Some secured lenders object to quick sale of ChryslerMon, 04 May 2009 00:00:00 -0700
A minority group of Chrysler LLC secured lenders has objected in bankruptcy court to the quick sale of Chrysler to a new corporate entity led by Fiat S.p.A.
The group of about 40 banks and hedge funds holds about $3 billion of the $6.9 billion in secured loans that Chrysler has with the banks.
Four major New York banks holding $4 billion of that debt agreed last week to settle for $2 billion in payment for the $6.9 billion owed.
Attorney Peter V. Pantaleo representing JP Morgan Chase Bank, said 90 percent of all secured lenders signed a letter in support of a Fiat hook up before the bankruptcy. But not all followed through to sign onto the settlement agreement. JP Morgan Chase is the lead bank among the New York banks settling for $2 billion.
But the dissident lenders, led by Oppenheimer Funds and Stairway Capital, contend the proposed sale of Chrysler assets favors junior creditors over senior creditors and seeks to improperly channel consideration to specific creditor groups.
The dissenting secured lenders said in their objection that the sale was being "orchestrated entirely by (the U.S.) Treasury and foisted upon the debtors without regard to corporate formalities."
Chrysler's new corporate entity, led by Fiat and its proposed 20 percent stake, would be considered the lead bidder for Chrysler's assets in a bankruptcy court auction.
The automaker asked U.S. Bankruptcy Judge Arthur Gonzalez to set a hearing as soon as May 21 to approve a $2 billion sale of most of its assets out of bankruptcy that would clear the way for a merger with Fiat, according to documents filed with the court.
The court has set a May 15 deadline for competing bids, according to Bloomberg News.
Chrysler also asked the court to approve a $35 million breakup fee for Fiat if the sale falls apart.
Chrysler filed for Chapter 11 bankruptcy protection Thursday to try to complete an alliance with Fiat and qualify for about $6 billion in additional federal loans.
President Obama scolded the dissident lenders in an address Friday Thursday for preventing an out-of-court settlement of Chrysler restructuring.
Fiat would start with a 20 percent stake in the new Chrysler, which would grow quickly to 35 percent. Fiat CEO Sergio Marchionne is expected to run the merged operations.
Reuters contributed to this report.
By David Barkholz- Automotive News