Court Opens Way For Chrysler Sale
Court opens way for Chrysler sale
The US Supreme Court has rejected a plea to block the sale of assets of the bankrupt carmaker Chrysler to the Italian firm Fiat.On Monday, the court granted a request to delay the sale while three Indiana state pension and construction funds pursue an appeal against it. But it has now ruled that a full appeal against the plan is not justified. The Obama administration, which strongly backed the sale, had called on the court to reject the request. Fiat can legally walk away from the deal if it is not completed by 15 June. Chrysler entered bankruptcy protection in April, following a massive slump in sales brought on by the financial crisis. ‘Grave consequences’The US government had strongly supported its sale to the Fiat-led consortium, which would allow it to emerge from bankruptcy. Fiat would control 20% of Chrysler, while 68% would be owned by a union trust, and the two governments would share 12%. However, the pension funds, which hold about 42m (26.3m) of Chrysler’s 6.9bn in secured loans, are opposed to the sale. They say it inverts usual bankruptcy practice and unlawfully rewards unsecured creditors, such as the union, ahead of secured lenders. Earlier, the Obama administration said that blocking the deal would have “grave consequences”. Solicitor General Elena Kagan said that blocking the sale could force Chrysler into liquidation. Chrysler had filed for bankruptcy protection on 30 April and had aimed to complete the sale and alliance with Fiat within 60 days. The Chrysler case could also set a precedent for General Motors, which entered bankruptcy protection on 1 June.
Source:BBC