Monday, June 8, 2009
Chrysler sale to Fiat appealed To The Supreme Court
Indiana pension funds group asks Supreme Court to block deal
David Shepardson / Detroit News Washington Bureau
Washington -- Lawyers for a group of Indiana pension funds have filed a long-shot emergency appeal with the U.S. Supreme Court seeking to block a deal that would allow Chrysler LLC's emergence from bankruptcy, which could come as early as today.
The appeal came a day after a three-judge panel of the U.S. Court of Appeals in New York approved the sale of Chrysler's "good" assets from bankruptcy to form a new company, Chrysler Group LLC. That firm will be majority owned by a United Auto Workers' health care trust fund. Fiat SpA, which will own 20 percent, will be able to acquire another 15 percent of Chrysler by meeting three benchmarks and will not have to put up any money for its stake. Fiat's CEO Sergio Marchionne will be CEO of Chrysler as well.
In a 39-page appeal filed before midnight Saturday, lawyers for the pension funds wrote: "The negative economic consequences of permitting an unlawful sale to proceed may well over time dramatically outweigh Chrysler's short-term harm. The public is watching and needs to see that, particularly when the system is under stress, the rule of law will be honored and an independent judiciary will properly scrutinize the actions of the massively powerful executive branch."
The petition was referred to Justice Ruth Bader Ginsburg, who handles emergency appeals for the 2nd Circuit. She can rule on the matter herself or refer it to the entire Supreme Court. Five of the nine justices would need to vote to hear the appeal and extend a stay blocking Chrysler's sale. By late Sunday evening, the court had not yet ruled.
The Indiana funds hold $100 million of Chrysler's $6.9 billion in secured debt. The funds cover about 100,000 workers and retirees in Indiana.
The U.S. Appeals Court on Friday upheld a May 31 bankruptcy court ruling clearing the way for the sale of most of Chrysler's assets to a group including Fiat and the UAW's health care trust fund. The UAW fund will hold a 55 percent stake, while the U.S. and Canadian governments will hold 10 percent. Fiat has the right to withdraw from the deal if Chrysler hasn't exited bankruptcy by June 15.
The appeals court gave creditors until 4 p.m. today to convince the Supreme Court to hear the case. If not, Chrysler could close on its sale soon afterward.
Much of the Indiana pension funds' arguments against the sale rely on internal e-mails between Chrysler and members of the Obama auto task force, which showed the overarching role of the government in pushing Chrysler into bankruptcy and directing the carmaker's actions ahead of the filing.
Legal experts said the creditors have a high hurdle to vault, since the High Court accepts just a fraction of the cases it receives -- and even fewer emergency cases for review.
But the case would represent the first time the court could rule on the legality of the $700 billion Troubled Asset Relief Program, the Wall Street bailout fund that Congress approved last fall. The creditors have challenged the use of the funds for automakers.
The Treasury Department agreed to pay off secured creditors of Chrysler with $2 billion in cash for $6.9 billion in debt -- or about 29 cents on the dollar.
The Indiana funds purchased the debt at an average price of 43 cents on the dollar -- meaning they would lose roughly $13 million on their $42 million investment.