SCOTUS Lets Chrysler’s Sale to Fiat Proceed
Posted Jun 9, 2009 6:40 PM CDT
By Sarah Mui
The U.S. Supreme Court ruled without dissent shortly after 7 p.m. ET today that the group of Indiana pension funds challenging a government-backed plan to sell most of Chrysler's assets to Fiat did not meet their burden of showing that a delay in the sale was justified.
The order approves a closing of the deal as of Monday, June 15, SCOTUSblog reports. The unsigned, two-page order (PDF provided by SCOTUSblog) emphasized that “a denial of a stay is not a decision on the merits of the underlying legal issues,” namely the legality of using federal "bailout" money to rescue an automaker, SCOTUSblog says.
Yesterday, U.S. Supreme Court Justice Ruth Bader Ginsburg granted a stay of the government-backed plan to sell most of Chrysler's assets at the request of a group of Indiana pension funds. The pension funds contended the sale unconstitutionally favored junior creditors above senior lenders, which would recover about 29 cents on the dollar under the plan. The Indiana funds bought about $42 million in senior debt about a year ago for 43 cents on the dollar. They also argued that the quick bankruptcy proceedings and the use of federal bailout money to fund Chrysler violated federal law.
Fiat CEO Sergio Marchionne told Bloomberg on Monday that he would "never" walk away from the deal, in spite of the deal's previously set June 15 deadline. And based on that statement, the Indiana pension funds today filed a new brief with the Supreme Court citing Marchionne's statement indicated the court had time to hear their case, the Detroit News reported.
But a brief (PDF provided by SCOTUSblog) today from Fiat didn't affirm that statement. "The crucial point that the Indiana pensioners ignore is that if the sale transaction approved by the bankruptcy court does not close by June 15, 2009, it will terminate under its express terms."
U.S. Solicitor Gen. Elena Kagan said in the DOJ filing (PDF provided by SCOTUSblog) that a stay would not only jeopardize the Fiat deal but also either cost the government another $1 billion of federal funds to cover Chrysler's losses or force the government to "abandon its role in the transaction."
Chrysler said in its filing (PDF provided by SCOTUSblog): "This is a holdup by a single lender who possesses less than 1 percent of the debt at issue."
"With the company losing an estimated $100 million a day, with tens of thousands of workers’ jobs said to be in jeopardy, and with no other rescuer on the horizon, the defenders of the plan pleaded with the justices to act swiftly, and they did, only about three hours after all of the legal papers were in hand," SCOTUSblog said.
Bloomberg: "Chrysler Sale to Fiat Allowed to Proceed by Top Court"
Am Law Daily: "Report: White & Case Billed Indiana Pension Funds $2 Million"
Updated at 7:24 p.m. to include additional coverage.