Three of Chrysler’s secured creditors are mounting a fresh attempt to thwart the carmaker’s Chapter 11 reorganisation on the grounds that it violates their legal rights and the US government’s authority under the Troubled asset relief programme.It is an interesting show down for the Obama Administration, the autoworker's union is facing off against a teacher's union (among others) retirement fund.
The three – all Indiana state pension funds – are among a group of 46 creditors that had appeared to back away this month from efforts to derail the process under which a “new” Chrysler would emerge from bankruptcy protection by July 1. The new entity would be owned by a union healthcare trust, the US government and Italy’s Fiat.
Chrysler, with backing from the US Treasury, had offered its secured creditors just under 30 cents on the dollar to settle claims totalling $6.9bn. Four big banks, holding the bulk of the claims, accepted the offer following political pressure from Washington.
However, the Indiana State Teachers’ Retirement Fund said on Wednesday that it had a fiduciary responsibility to its members to continue the fight. The fund stands to lose $4.6m under the current settlement proposal and has teamed up with Richard Mourdock, Indiana state treasurer, to try to recover those losses.
The latest objections could galvanise other lenders to renew their challenge. “I fully support their motion and believe a number of lenders (including us) will ultimately join their group,” said George Schultze of Schultze Asset Management, one of the creditors that had abandoned an earlier legal fight.
In a court filing on Wednesday, the Indiana funds accused the government of adopting a strategy of “the ends justify the means”.
The procedural fight has moved beyond the Bankruptcy Court overseeing the cram-down (as it cram it down everyone's throat) and is now in the appellate review. I expect a Circuit Court of Appeals will have to rule on the matter and an emergency Supreme Court hearing is not out of the realm of possibility.
Having been involved in a couple of smaller bankruptcy proceedings that have taken years, the speed of the Chrysler "bankruptcy" is frightening and it should be frightening to lots of people.