for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up
Money News

Fiat already concerned for 'deteriorating' Chrysler

NEW YORK (Reuters) - Italian carmaker Fiat SpA said in court papers on Friday that it is “already concerned” about the “deteriorating value” of Chrysler’s assets

A Fiat car is parked in front of the Fiat headquarters in Turin in this file image from January 24, 2005. REUTERS/Max Rossi/Files

and that a U.S. district court should not obstruct its sale process.

Chrysler, its creditors’ committee, and Fiat filed a series of court documents on Friday, asking the U.S. District Court in Manhattan to reject a request by a group of Indiana state pension funds that the district court intervene in the bankruptcy case and postpone the sale of Chrysler’s assets.

“Any material delay in the implementation of the bidding and sales process that the Bankruptcy Court has carefully but expeditiously set in motion will destroy Chrysler, put hundreds of thousands of people out of work, and devastate communities in both the United States and Canada,” Chrysler said in court documents.

Chrysler has a government deadline of June 15 to close the transaction to sell itself to a “New Chrysler” owned by the U.S. and Canadian governments, Chrysler’s union and Fiat, according to court papers. Chrysler’s unsecured creditors’ committee said

in court papers on Friday that if the sale was not able to go forward it would mean certain liquidation for the iconic U.S. automaker.

DETERIORATING VALUE

Fiat, however, said that any delay to the sale process “could ultimately prove fatal” to Fiat’s plan to revive Chrysler. It said it already has concerns about the value of the assets “New Chrysler” is expected to acquire from “Old Chrysler” as the company’s plant shutdown is affecting its suppliers and dealer networks.

Chrysler’s financial advisory firm said in separate bankruptcy court documents on Thursday that, based on updated financial information, the financial recovery for lenders and the U.S. government would be worse under a liquidation scenario than it previously thought.

In the documents, Capstone Advisory Group said the company’s first lien, or most senior lenders, would have recovered 18 percent of their investment at the most and zero at the worst in two different liquidation scenarios based on its cash balance as

of April 30.

In a previous analysis released after Chrysler’s April 30 bankruptcy filing and based on its April 1 cash balance of $1.34 billion, the lenders would have recovered from 9 to 38 percent of their investment.

The report prepared by Capstone’s Robert Manzo said the car company had $407 million of free cash to use for a potential liquidation as of April 30.

Under the new scenario, the U.S. Treasury would recover 3 to 5 percent of its investment, compared with 3 to 6 percent in Capstone’s previous analysis.

Chrysler and Fiat said that if the district court decides to grant the Indiana pension funds’ request, the funds should be required to put up a substantial bond to compensate parties harmed by that delay. Chrysler asked that the funds put up a $2

billion bond.

According to court papers, the Indiana pension funds hold about $43 million of Chrysler’s total $6.9 billion in senior debt. The pension funds have said they object to the way Chrysler is planning to sell itself and distribute funds to more junior creditors ahead of them. They say that the government does not have the authority to take these actions and asked that the sale be delayed so constitutional questions about the

government’s involvement can be explored.

The district court is slated to hear the pension funds’ request on Tuesday. Chrysler is scheduled to have its sale hearing in bankruptcy court on Wednesday.

The bankruptcy case is In re: Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002. The district court case is in U.S. District Court, Southern District of New York, No. 09-04743.

For more news on Reuters Money click in.reuters.com/money

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up