The judge overseeing Chrysler LLC’s Chapter 11 proceedings has ruled that the automaker can start taking steps toward selling the vast majority of its assets to Italy’s Fiat Group SpA.
NEW YORK (AP) — The judge overseeing Chrysler LLC’s Chapter 11 proceedings has ruled that the automaker can start taking steps toward selling the vast majority of its assets to Italy’s Fiat Group SpA. The judge also said lawyers for a dissident group of lenders have until noon Wednesday to file a list of members with the court, ruling that their identities do not need to be sealed despite reported death threats.
After more than seven hours of testimony and legal arguments, Judge Arthur Gonzales approved the bidding procedures for the proposed sale late Tuesday, saying they represented a “clear and orderly process.”
Bids for all or part of Chrysler’s assets must be submitted by May 20, and a determination of the lead bid made by May 26. A final sale hearing would be held on May 27 and the sale could close in as little as 30 days after that.
If a sale to Fiat fails to go through, Chrysler will pay the automaker a breakup fee of $35 million.
Lawyers on Tuesday packed the hot and stuffy New York City courtroom for a third-straight business day of testimony in the case, which the automaker hopes will end in a swift exit from court oversight. Attorneys for Auburn Hills, Mich.-based Chrysler LLC argued that the automaker had essentially been up for sale for most of the last two years and that a speedy sale was needed in order to preserve the value of the company’s assets.
In addition, it’s indisputable that the automaker cannot survive without government financing that would not be provided without some kind of partnership with another automaker, Chrysler attorney Corinne Ball said.
“It’s uncontroverted that time is not our friend here,” Ball told the court. “The preservation of value demands that we move forward.”
Ball pointed to cases such as Lehman Brothers, Bear Stearns and Wachovia as examples of how quick sales at distressed companies can be successful.
Asset sales at companies operating under bankruptcy protection usually are accomplished through auctions, though there generally is a lead bidder, which in this case would be Fiat. The idea is to make sure that the company, and its lenders, get the most that they can for the assets.
Chrysler has said that it’s open to bids from other parties, but doubts that it would get a better offer than the one from Fiat already on the table.
But those representing a dissident group of Chrysler lenders said the sale procedures were designed to prevent other bidders from coming forward and argued for Gonzales to grant more time for potential buyers to do the research they needed and make appropriate offers. On Monday, the same group of lenders had objected to a Chrysler motion to allow the company to access $4.5 billion in bankruptcy financing, saying that it was too closely tied to the proposed sale.
Thomas Lauria, an attorney for the lenders group, argued that no other legitimate bids for Chrysler have surfaced in the last two years because there hasn’t been a proper process in place for them to be submitted.
Lauria said it’s Chrysler’s own fault that it waited until it ran out of money to file for bankruptcy protection and potential bidders for the company’s assets shouldn’t be forced to rush because of the company’s actions.
“The fact is, the liquidation value of the company was materially reduced over that period of time,” Lauria said. “And at the same time, the company was burning up all of its cash and getting ready to tell us all we had a lot of things to do and to hurry up.”
Early on in Tuesday’s hearing, Gonzales ruled that the identities of the dissident group’s members do not need to be sealed, despite arguments from their attorney that death threats were made against some of them.
Lauria said the names should be sealed by the court because some of the members had received threats of violence after been singled out by President Obama as the cause of Chrysler’s bankruptcy filing.
The group of holdout lenders had refused a deal that would amount to 29 cents on the dollar to dissolve what they’re owed and go along with the government’s restructuring plan for Chrysler. President Barack Obama said Thursday that the lenders were seeking an “unjustified taxpayer-funded bailout” after Chrysler and his auto task force cleared the company’s other hurdles, including the Fiat deal and a cost-cutting pact that the United Auto Workers ratified last week.
But Robert Hamilton, an attorney for Chrysler, said those threats only amounted to four or five “rants” on a newspaper Web site.
Gonzales gave the lenders group until 12 noon EDT Wednesday to file their list of members with the court.
Michigan’s state attorney general also filed an objection Tuesday over concerns that if the sale to Fiat goes through, the new company formed wouldn’t meet obligations to a state workers’ compensation fund. But Gonzales said the objection could be resolved later if and when he is asked to rule on a final sale motion.
As the afternoon hearing stretched into the night, Chrysler turnaround officials and executives testified about the events of the months leading up to the company’s bankruptcy protection filing.
Scott Garberding, Chrysler’s executive vice president for procurement, described efforts to form alliances with automakers other than Fiat, including General Motors Corp. and Nissan, in recent years.
In addition, Robert Manzo, an executive director with Capstone Advisory Group LLC and one of Chrysler’s top restructuring advisers, described how the automaker found itself with few options and dwindling cash in the month leading up to Chrysler’s government-imposed April 30 restructuring deadline.
“Given the options available over the past 30 days and the lack of liquidity, we could choose a transaction along the lines of the Fiat deal with the help of the U.S. Treasury or face immediate liquidation,” Manzo said.