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NEW YORK - Supreme Court Justice Ruth Bader Ginsburg on Monday delayed Chrysler’s sale of most of its assets to a group led by Italy’s Fiat, but didn’t say how long the deal will remain on hold.
Ginsburg said in an order that the sale is “stayed pending further order,” indicating that the delay may only be temporary.
Chrysler LLC has said the sale must close by June 15, or Fiat Group SpA has the option to walk away, leaving the Auburn Hills, Mich., automaker with little option but to liquidate.
A federal appeals court in New York approved the sale Friday but gave opponents until 4 p.m. EDT Monday to try to get the Supreme Court to intervene. Ginsburg issued her order right before the deadline.
Ginsburg could decide on her own whether to end the delay, or she could ask the full court to decide. It is unclear when she or the court will act.
Chrysler claims the agreement with Fiat is the best deal it can get for its assets and is critical to the company’s plan to emerge from Chapter 11 bankruptcy protection.
But a trio of Indiana state pension and construction funds, which hold a small part of Chrysler’s debt, have been fighting the sale, claiming that it unfairly favors Chrysler’s unsecured stakeholders ahead of secured debtholders like themselves.
As part of Chrysler’s restructuring plan, the automaker’s secured debtholders will receive $2 billion, or about 29 cents on the dollar, for their combined $6.9 billion in debt. The Indiana funds bought their $42.5 million in debt in July 2008 for 43 cents on the dollar.
The funds also are challenging the constitutionality of the Treasury Department’s use of money from the Troubled Asset Relief Program to supply Chrysler’s bankruptcy protection financing. They say the government did so without congressional authority.
Consumer groups and individuals with product-related lawsuits also are contesting a condition of the Chrysler sale that would release the company from product liability claims related to vehicles it sold before the “New Chrysler” partnered with Fiat is created.
Individuals with claims against “Old Chrysler” would have to seek compensation from the parts of the company not being sold to Fiat. But those assets have limited value and it’s doubtful that there will be anything available to pay consumer claims.
The appeals come as Congress intensifies its scrutiny of the Obama administration’s government-led restructuring of Chrysler and General Motors Corp. The Senate Banking Committee said it planned to call Ron Bloom, a senior adviser to the auto task force, and Edward Montgomery, who serves as the Obama administration’s director of recovery for auto communities and workers, to a hearing Wednesday.
Sen. Christopher Dodd, D-Conn., the committee’s chairman, planned to review the use of TARP funds to help the auto companies and look at whether taxpayers will receive a return on their investment.
Sources: MSNBC, Reuters, Yahoo News, CNN
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