Auto Industry and Chrysler and State Government and Public Pensions and Government & Economic Development and Government

Supreme Court rejects Indiana's appeal of Chrysler sale

December 14, 2009

The U.S. Supreme Court has declined to take another look at Chrysler's bankruptcy.

The justices on Monday turned down an appeal from the state of Indiana pension funds that earlier challenged the automaker's bankruptcy proceedings. The bulk of Chrysler LLC's assets were sold to Italy's Fiat.

The court previously rejected the pension funds' effort to block the sale.

In the latest appeal, the funds argued that the arrangement worked out with Fiat and approved by federal courts violated federal bankruptcy law. The pension funds said they were not trying to reverse the bankruptcy sale, but instead wanted to recover money for themselves and other Chrysler creditors.

The Supreme Court in June rejected the appeal by a trio of Indiana pension and construction funds to block the automaker's sale. The court at that time did not consider the merits of the opponents' arguments, only whether to hear their full-blown appeal.

Indiana officials claimed the sale unfairly favored Chrysler's unsecured stakeholders, such as the United Auto Workers, ahead of secured debt holders like the pension funds.

Under the deal, the automaker's secured debtholders got about $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some of the debtholders balked at the deal, saying as secured lenders they deserved more. The Indiana funds involved in the Supreme Court appeal held about $42.5 million, or less than 1 percent, of Chrysler's $6.9 billion in secured debt. They bought it in 2008 for 43 cents on the dollar.

The funds also challenged the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy protection financing. They say the government did so without congressional authority.
 

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