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Gonzalez denied White & Case attempt to block Chrysler sale

by David Zatz on

Bankruptcy court judge Arthur Gonzalez, as expected, denied law firm White & Case’s politically charged motion to delay the sale of Chrysler assets. The firm had asked Gonzalez to delay the sale while they challenged its legality in another court. White & Case, which had represented several dissenting financial groups (which appear to have picked up Chrysler debt at a substantial discount), is representing two Indiana state pension funds and an Indiana construction fund.

Gonzalez said that White & Case had not shown that the funds would suffer irreparable harm if the sale hearing continued as plans, while a prompt sale is needed for Chrysler’s survival. The sale hearing is still scheduled for May 27, with the sale to be formalized shortly afterwards, taking the bulk of Chrysler out of bankruptcy and into the new Chrysler Group; the remainder of the company is expected to remain in Chapter 11 for years.

While White & Case’s statements are mainly concerned with political accusations and heated language, their legal basis is that the deal gives preferential treatment to stakeholders other than secured lenders, primarily the U.S. government and the union workers’ pension fund, which will be accepting a 55% stake in Chrysler in place of $10 billion in contracted payments.

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