Log In | Register
NEW YORK — Attorneys for a pair of Indiana state pension funds and a state construction fund will head to U.S. District Court on Tuesday to challenge the legality of Chrysler's plan to exit bankruptcy protection.
The appearance comes just a day before a hearing in bankruptcy court where Chrysler LLC will ask for permission to sell the bulk of its assets to a group led by Italy's Fiat Group SpA.
Attorneys for the funds argue that the unprecedented role of the Treasury Department makes a legal review necessary. They also have asked the court for a halt Chrysler's bankruptcy court proceedings, including the proposed sale, until the review can be completed.
But attorneys for Chrysler and Fiat argue that delaying the sale could cause the deal to fall apart and destroy Chrysler, noting the more than $10 billion in financing that the U.S. and Canadian governments have promised to fund the new company is contingent on the sale closing by June 15.
The funds, which include the Indiana State Teachers retirement Fund and Indiana State Police Pension Trust, along with the Indiana Major Moves Construction Fund, hold a combined $42.5 million of Chrysler's total $6.9 billion in secured debt.
They filed an objection to the proposed sale in bankruptcy court earlier this week, saying that it puts the interests of other parties ahead of their own and those of other secured lenders.
At a hearing Thursday, they asked U.S. Judge Arthur Gonzalez to postpone Wednesday's sale hearing in order to give the district court time to rule on the legality of the bankruptcy case, but the motion was denied.
Chrysler has received $5.8 billion in federal loans. The Treasury Department said Friday it had provided $757 million to the company as a one-time adjustment connected to its bankruptcy proceeding. The payment doesn't change Chrysler's overall capital needs of around $8 billion, Treasury officials said.
