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High court blocks Chrysler sale to Fiat

NEW YORK — Chrysler's five weeks of breakneck-speed bankruptcy proceedings came to a screeching — but possibly temporary — halt Monday, when Supreme Court Justice Ruth Bader Ginsburg delayed its sale of assets to Italy's Fiat.

The move could derail the government's ambitious plan for the U.S. automaker to blaze a path to profitability without the burden of many of its debts.

Ginsburg issued a stay just a week before Chrysler says the government-backed sale must go through. After June 15, Fiat could walk away from the deal and leave the struggling U.S. automaker with little option but to liquidate.

Chrysler said it had no comment until it receives further information from the court.

Ginsburg said in her one-sentence order that the sale is "stayed pending further order," indicating that the delay may only be temporary. Ginsburg could decide on her own whether to end the delay, or she could ask the full court to decide.

A federal appeals court in New York approved the sale Friday, but gave opponents until 4 p.m. Monday to try to get the high court to intervene. Ginsburg issued her order minutes before the deadline.

Despite the aggressive objections of a trio of Indiana state pension and construction funds that own a small part of Chrysler's secured debt, the automaker has moved swiftly through the Chapter 11 process.

The Auburn Hills, Mich., company received bankruptcy court approval for the sale just a month after filing for bankruptcy protection and had been expected to emerge from court oversight when the sale closed.

Chrysler's ability to speed through the process has partially been a result of the involvement of the Obama administration's auto task force, which provided $4.5 billion in bankruptcy financing and helped negotiate a deal between the company's stakeholders.

Under a deal brokered in the days leading up to Chrysler's April 30 Chapter 11 filing, Fiat will receive up to a 35 percent stake in the new company created by the sale, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.

The United Auto Workers union will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 percent stake.

Meanwhile, the automaker's secured debt holders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some of the debt holders balked at the deal.

The Indiana funds claim the sale unfairly favors Chrysler's unsecured stakeholders such as the union ahead of secured debt holders like themselves.

Chrysler also is working to reduce its ranks by 789 dealers, or about 25 percent, as part of its cost-cutting actions. But the move, which still needs bankruptcy court approval, is being challenged by a group representing more than 300 dealers, as well as individual dealers.

A hearing on the motion that began Thursday with the testimony of about a dozen dealers is scheduled to continue today with arguments. U.S. Judge Arthur Gonzalez is expected to rule after arguments conclude.

High court blocks Chrysler sale to Fiat 06/08/09 [Last modified: Monday, June 8, 2009 8:07pm]

    

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