Group seeks to block Chrysler/Fiat as Opel heats up

By Emily Chasan and Madeline Chambers

NEW YORK/BERLIN (Reuters) - A group of investment funds sought on Monday to block Chrysler's planned alliance with Fiat SpA, while the Italian automaker advanced its bid to overhaul the industry by setting its sights on Germany's Opel.

The dissenting lenders led by Oppenheimer Funds and Stairway Capital argued in a New York bankruptcy court that the sale proposal was "orchestrated entirely by the U.S. Treasury and foisted upon the debtors."

A lawyer for the group, Tom Lauria, said some identified publicly in the politically charged reorganization have received death threats "which they perceive as being bona fide." Those lenders have notified police and the FBI, he said.

President Barack Obama called the dissenters "speculators" in public criticism last week for refusing to join Chrysler's biggest banks in a government-brokered deal to wipe out Chrysler's $6.9 billion debt and move forward with the Fiat alliance.

"We still have a very fragile coalition to get from here to there," Corinne Ball, Chrysler's bankruptcy lawyer, said near the start of a court hearing on Monday.

Chrysler asked U.S. Judge Arthur Gonzalez to schedule a hearing as soon as May 21 to approve a $2 billion sale of most of the automaker's assets.

"Absent a prompt sale, approved in the coming weeks, the value of the debtors' assets will rapidly decline and the ability to achieve a going concern sale will be lost," Chrysler said in court documents supporting the sale to Fiat.

Gonzalez adjourned a hearing on Chrysler's request until 2:30 p.m. EDT on Tuesday.

JPMorgan Chase Co lawyer Peter Pantaleo, of Simpson Thacher & Bartlett LLP, told the court on Monday that Chrysler had more than the required support from the secured lenders to support the proposed sale.

JP Morgan led a group of banks that control about 70 percent of Chrysler's debt. They've agreed to a deal that would pay lenders $2 billion

Chrysler's bankruptcy, one of the biggest U.S. public company bankruptcies ever, is widely seen as almost a dry run for a potential reorganization of General Motors Corp.

GM, which like Chrysler is surviving on government bailout money, faces its own restructuring deadlines on June 1 and is trying to restructure its business in the U.S. and overseas.

This includes the potential sale of its German-based Opel unit, possibly to Fiat.

Fiat Chief Executive Sergio Marchionne said on Sunday his company could seek a merger with Opel, then spin off and list the combined entity.

Combining with Chrysler as well as Opel, which makes up 80 percent of GM Europe's annual sales of $34.4 billion, fits Marchionne's strategy of bulking up Fiat to survive the crisis engulfing the auto industry.