Judge denies Indiana pensioners withdrawal motion
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Judge denies motion by group of Indiana state funds, Chrysler sale hearing to go forward NEW YORK (AP) -- A U.S. district judge said Tuesday that a legal review of Chrysler's bankruptcy proceedings isn't needed before a hearing on the sale of most of the automaker's assets can take place.
Judge Thomas Griesa denied a withdrawal motion from attorneys representing a pair of Indiana state pension funds and a state construction fund. He declined to provide specific reasons for his ruling during Tuesday's hearing, saying they will be included in a written ruling expected to be issued later in the day.
The hearing in district court came a day before a bankruptcy court hearing on the proposed sale of Chrysler LLC's assets to Italy's Fiat Group SpA. Attorneys for Chrysler maintain that the sale needs to close by June 15, or the deal with Fiat could crumble and ultimately result in the liquidation of Chrysler.
Chrysler attorney Thomas Cullen said the agreement with Fiat represents the best deal Chrysler could get to save itself, noting that the company also looked to other automakers and its lenders for help but didn't get any.
"The government was our bank of last resort," Cullen said. "We desperately, desperately needed that financing or we would have needed to liquidate.
" But attorneys for the funds argued that the unprecedented role of the Treasury Department in the case and the use of TARP funds for the financing made a review necessary and required that Chrysler's bankruptcy court proceedings -- including the sale hearing -- be halted in the meantime. They say Chrysler should still be able to make its deadline even with a short delay.
Glenn Kurtz, an attorney for the funds, accused the government of trying to unfairly speed Chrysler through the bankruptcy process, pushing aside the rights of bondholders.
"The rule of law should apply even if there are adverse social consequences," Kurtz told the court. When Chrysler filed for bankruptcy on April 30, the government estimated the company would exit bankruptcy in 30 to 60 days. The automaker is nearing the end of the process and is expected to emerge from court protection closer to the 30-day timetable, said a person familiar with the matter. The person was not authorized to speak publicly on the matter and spoke on condition of anonymity.
At a bankruptcy court hearing last week, attorneys for the funds asked U.S. Judge Arthur Gonzalez to postpone the sale hearing in order to give the district court time to rule, but that motion was denied. The funds also have filed a motion objecting to the sale, saying it puts the interests of other parties ahead of those of the funds and other secured debt holders.
Griesa noted that the funds will have the right to appeal Gonzalez' ruling on the sale motion if they don't like it. Kurtz said after Tuesday's hearing that he fully expects the sale motion to end up in district court.
As part of Chrysler's restructuring, the automaker's bondholders are expected to receive a combined $2 billion in cash in a deal worth 29 cents on the dollar. Their remaining $4.9 billion of debt will remain with the plants and other assets leftover from the sale -- it's doubtful whether any of it will be paid back.
The three 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 bought the bonds in July 2008 and paid 43 cents on the dollar, Kurtz told the court Tuesday.
Over a hundred other parties, including many of the Chrysler dealers whose franchises the automaker wants to terminate as part of its reorganization, have also filed objections to the sale and are expected to appear at Wednesday's hearing.
Associated Press Writer Ken Thomas in Washington contributed to this report