A US appeals court on Friday upheld Chrysler's sale of most of its assets to Italy's Fiat, but the deal will remain on hold to allow an appeal to the nation's highest court. The 2nd US Circuit Court of Appeals said it will continue to delay the sale until 4 pm EDT (2000 GMT) Monday, unless the US Supreme Court intervenes.
The three-judge appeals court panel was expected to release a written ruling later Friday. Thomas Lauria, an attorney representing the trio of Indiana state pension and construction funds that appealed the sale, said his clients will keep pressing their objections.
"We will be going to the Supreme Court to see if we can get some time to get this case considered by them," Lauria said after an afternoon appeals court hearing. Chrysler said in a statement, "We're pleased with the court's decision and appreciate the court's recognition of the need for a swift conclusion to the process so we can quickly start becoming a new car company."
The Supreme Court will decide in the coming days whether to issue its own stay in the case, and possibly take up the appeal, or let the appeals court stay expire and allow the sale go through. The Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund and the state's Major Moves Construction Fund claim the deal unfairly favours the interests of the company's unsecured stakeholders ahead of those of secured debtholders such as themselves.
The funds also challenged 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. "I would ask the court to view this as standing the bankruptcy process on its head," Lauria said in his argument.
The Treasury Department said it was "extremely gratified" that the appeals court upheld the sale. Besides Chrysler LLC, Fiat Group SpA and the Indiana funds, the appeals court also heard arguments from attorneys representing consumer groups and individuals with product-liability lawsuits against Chrysler.
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. 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 favourable deal to buy or finance the automaker.
"Mr LaSorda talked to everybody in the world," Cullen said. Auburn Hills, Michigan-based Chrysler has maintained that the sale must 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. Production at Chrysler's manufacturing plants remains halted pending the closing of the sale.
Chief Judge Dennis Jacobs asked Lauria why he believed his clients would be better off if the deal with Fiat went away and Chrysler was forced to liquidate. US Judge Arthur Gonzalez, the bankruptcy judge overseeing Chrysler's case, approved the sale on Sunday. He ruled that the funds do not have the standing to challenge the use of TARP money because they will receive their fair share of the $2 billion set aside for secured debtholders, which is more than they would receive if Chrysler is liquidated.