Chrysler, UAW and others file objections to Indiana appeal

Chrysler, the United Auto Workers, Fiat and Chrysler’s unsecured creditors filed objections yesterday to the appeal granted a group of Indiana pension funds hoping to block the sale of Chrysler assets to NewCarCo Acquisitions.

The Indiana funds are challenging Judge Arthur Gonzalez’s decision to approve the sale and have a hearing scheduled for today with the U.S. Court of Appeals for the Second District.

Oppenheimer Funds, which initially opposed the sale but later joined the majority of Chrysler’s secured creditors in approving the sale, turned around again, filing a brief in support of the Indiana group.

The Indiana funds, which believe they would get a better payout if Chrysler is liquidated, maintain the sale is unconstitutional and does not give proper precedence to senior secured lenders. They also say the government overstepped its bounds by using Troubled Asset Relief Program (TARP) funds. However, bankruptcy experts quoted by Bloomberg News say that argument is a likely loser as Gonzalez told them that was not a subject for his court, a response the Indiana group is also likely to hear from the appeals court.

The Bloomberg sources also say the Indiana funds are unlikely to prevail as they will have a difficult time proving that they would fare better than the 29 cents on the dollar they will receive from the asset sale that has been approved. Their claim that Chrysler is using Section 363 of the Bankruptcy Code as cover for a “stealth reorganization” will also fail because the sale has a June 15 deadline after which Fiat can walk away, which makes an expedited sale under Section 363 the only alternative to liquidation. This was part of the reason Judge Gonzalez waived the customary ten-day waiting period and approved the sale to take place today. The transaction has been postponed until the appeals court holds its hearing.

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