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The U.S. Supreme Court has ruled that Chrysler's sale to Fiat can proceed. Over the past week we thought that Chrysler's bankruptcy was almost over. But then a group of Indiana pension funds filed suit with the court to delay the sale.
At issue was $42 million of $6.9 billion of secured debt. The pension funds held that Chrysler's offer of 29 cents on the dollar violated their creditor rights.
A United Auto Workers union health care trust, a more junior unsecured debtor, would receive 55% equity stake. This deal was much more favorable than the offer to the Indiana pension funds.
The other secured creditors have accepted debt exchange under pressure from the Obama Administration.
The Indiana funds held that the government acted unlawfully by using the "troubled assets relief program" (TARP), meant for financial institutions, to bail out Chrysler.
Fiat may be getting cold feet due to the fact that Chrysler factories have been closed since April 30, creating further erosion of the company's assets. Fiat has set a June 15 deadline to close the deal. If this drags on much longer, the government would be leery of providing more money to Chrysler.
At stake here are 55,000 jobs, 2,400 dealers, and hundreds of parts suppliers.
Do you believe that this deal will go through?
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