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A U.S. appeals court said Friday it would conditionally approve Chrysler's sale to Fiat but is keeping the deal on hold until Monday to allow an appeal.
The 2nd U.S. Circuit Court of Appeals said it will block the sale until 4 p.m. EDT Monday unless the U.S. Supreme Court declines to hear appeals from objectors.
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The appeals court heard arguments Friday from attorneys representing Chrysler LLC, Fiat Group SpA and a trio of Indiana state pension and construction funds, the latter of which say the deal approved by a bankruptcy judge unfairly favors the interests of the company's unsecured stakeholders ahead of those of secured debtholders such as themselves. "I would ask the court to view this as standing the bankruptcy process on its head," Thomas Lauria, an attorney for the Indiana pension funds, argued before the court.
The 3-judge panel of the appeals court asked Glenn Kurtz, another attorney for the Indiana pensions, if his colleagues were preparing to file paperwork with the U.S. Supreme court. "You would presume correctly," Kurtz said, prompted laugher in the court room.
Late Tuesday, the appeals court halted the sale pending the Indiana state funds' appeal. Chrysler had hoped to close the sale by the end of this week.
Lawyers for the Indiana funds said the proposed sale to Fiat would unfairly wipe out all of Chrysler's past liabilities.
But Chrysler lawyer Thomas Cullen said the deal is the only way to keep Chrysler operating and the objectors would still get a recovery that's the best they could hope for. "The objectors are going to be harmed by the remedy they seek. They are doing better than liquidation," Cullen said.
He said Chrysler's former vice chairman and president, Tom LaSorda, spent 18 months looking for someone willing to enter a more favorable deal to buy or finance the automaker. "Mr. LaSorda talked to everybody in the world," Cullen said.
Auburn Hills, Mich.-based Chrysler has maintained that the sale most be completed quickly to save the automaker from complete collapse. If the deal doesn't close by June 15, Fiat has the option of pulling out of the deal. In addition, production at Chrysler's manufacturing plants remains halted pending the closing of the sale.
The funds, which include the Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund, and the state's Major Moves Construction Fund, also are challenging the constitutionality of the Treasury Department's use of Troubled Asset Relief Program, or TARP, funds to supply Chrysler's bankruptcy protection financing. They say the Treasury did so without congressional authority.
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