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Thursday, May 21, 2009

Ind. Gov't. - More on: "Pension Funds Object to Chrysler Sale, Want Trustee"

Updating this ILB entry from yesterday, here is a story today in the Washington Post headed "New Group of Creditors Tries to Block Chrysler's Sale," reported by Tomoeh Murakami Tse. It begins:

NEW YORK, May 20 -- The government-orchestrated sale of Chrysler to Italian carmaker Fiat is facing a fresh legal challenge from some of the American carmaker's lenders, which are trying to take the fight to federal district court.

Pension funds representing Indiana teachers and police officers, and a state construction fund, filed Wednesday to have the Chrysler bankruptcy proceedings heard by the district court, which has authority over the bankruptcy court.

The funds contend that the automaker's sale violates their rights as senior secured lenders to Chrysler, and that under the proposed sale, they would recover less than junior lenders. They also think the government does not have the authority to use federal rescue money designated for banks to bail out Chrysler.

"We would be irresponsible as fiduciaries if we didn't fight," Richard Mourdock, Indiana's treasurer, said in an interview Wednesday. "You hope reason and precedent will prevail. . . . I certainly feel like David vs. Goliath, but I know I'm doing the right thing for the pensioners."

He said the three funds would lose about $5.6 million under the government-backed plan, in which Chrysler is offering secured creditors 29 cents on the dollar.

The filing in district court followed a decision by U.S. Bankruptcy Judge Arthur Gonzalez to deny the pension funds' request to stay the bankruptcy proceedings until the district court heard the case.

The Indiana funds are represented by White & Case, the same law firm that represented a group of hedge funds that sought unsuccessfully to block Chrysler's sale. The hedge funds, also secured lenders, gave up their legal battle earlier this month, saying that publicly opposing the federal government had become too difficult.

The Wall Street Journal has this story, which begins:
New opposition to Chrysler LLC's restructuring plan emerged as Indiana pension funds holding Chrysler senior debt filed objections to the plan, saying the U.S. government's involvement had "infected" the company's bankruptcy.

The opposition was led by the Indiana State Teachers Retirement Fund, the Indiana State Police Pension Trust and the Indiana Major Moves Construction Fund, which together own about $42.5 million of Chrysler's $6.9 billion in secured debt, according to the funds' lawyer.

The funds are unhappy the government put together a restructuring that will give secured creditors only 29 cents on the dollar. Chrysler unsecured creditors ranking below them -- namely the United Auto Workers union -- will recover more.

Posted by Marcia Oddi on May 21, 2009 09:19 AM
Posted to Indiana Government