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Chrysler creditor group asks court to appoint examiner
May 20, 2009 / 1:17 PM / 8 years ago

Chrysler creditor group asks court to appoint examiner

NEW YORK (Reuters) - A group of Indiana pension funds on Wednesday asked a U.S. bankruptcy court to appoint an examiner to investigate Chrysler LLC’s CBS.UL business decisions, and made a series of other legal challenges to the automaker’s plan to sell itself.

At a court hearing on Wednesday Judge Arthur Gonzalez denied a request by the pension funds to have the District Court, rather than the Bankruptcy Court, determine if the government has exceeded its authority in the reorganization of Chrysler.

Shortly after the Gonzalez decision, the funds’ attorney filed a request with the District Court, which plans to hear the complaint on Tuesday. The funds’ attorney also told the District Court they will file a motion asking it to intervene and postpone the proposed sale of most of Chrysler’s assets.

Separately, Chrysler said Robert Kidder would become chairman of the company after it completes its sale and merges with Fiat.

In bankruptcy court papers, the group of pension funds asked that a Chapter 11 trustee be appointed to manage the case due to what they claim is too much control by the federal government.

“The government has exceeded its authority, caused the debtors to breach their fiduciary duties, dominated and controlled all of the key decisions and assessments the debtors are required to make, and otherwise utilized this bankruptcy process to advance its own agenda at the expense of the debtors’ estates,” the pensioners said in a filing with the U.S. Bankruptcy Court in New York.

The bankruptcy judge did not hear arguments on or rule on the request for a trustee or examiner.

A Chrysler spokeswoman was not immediately available to comment.

According to U.S. bankruptcy laws an examiner can be appointed in any bankruptcy case if someone requests it and the court finds the company’s debts exceed $5 million. Examiners typically look into issues surrounding the bankrupt company’s collapse. A trustee is separate from an examiner and is usually a court-appointed independent manager of the bankrupt company that replaces current management.

The so-called Indiana Pensioners consist of the Indiana State Teachers Retirement Fund, the Indiana State Police Pension Trust and the Indiana Major Moves Construction Fund, which are holders of Chrysler senior secured debt.

The group, is represented by law firm White & Case -- the same firm which represented the now disbanded group of Chrysler’s dissenting senior lenders in the case.

CHRYSLER MOVES ALONG

Despite the new challenge, Chrysler received court approval for other requests that move the company further ahead toward its planned sale to a “New Chrysler” owned by the government, its union and Fiat SpA FIA.MI.

Chrysler received final court approval on Wednesday for $4.96 billion in financing from the U.S. and Canadian governments to get it through its bankruptcy.

The amount was increased slightly from previous requests, due to added financing for GMAC LLC so it could extend credit to Chrysler dealerships.

GMAC replaced Chrysler Financial, a separate company from the automaker, as the primary provider of credit to Chrysler dealerships. Chrysler Financial’s sources of funds dried up after the automaker declared bankruptcy, and GMAC stepped in to ensure funding for dealers.

Chrysler got approval for an emergency request to pay $600 million to GMAC to shore up its financing for dealers. The $600 million provides added funds to cover a loss-sharing agreement that is part of GMAC’s agreement to replace Chrysler Financial.

Chrysler also received approval to pay essential suppliers, and said it has restarted payments to employees on long-term disability. It said it would file papers in the next few days on which contracts and agreements “New Chrysler” would assume.

Chrysler said Kidder, a private-equity investor and former consultant who once worked for Ford Motor Co (F.N), will replace Bob Nardelli.

Kidder, who was also the chief executive of battery maker Duracell, also serves as the lead director of Morgan Stanley (MS.N) and a board member at Schering Plough Corp.SGP.N

The case is In re Chrysler LLC, US Bankruptcy Court, District of New York, No. 09-50002.

Reporting by Emily Chasan and Tom Hals, Additional reporting by Chelsea Emery and Poornima Gupta; Editing by Brian Moss, Carol Bishopric and Bernard Orr

Our Standards:The Thomson Reuters Trust Principles.
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