U.S. Bankruptcy Judge Arthur Gonzalez on Monday delayed a hearing on Chrysler's plan to sell its assets to a new Chrysler-Fiat partnership after objections from at least two of the company's lenders that they had only had a few hours to review the plan.
The hearing also included a request from the lawyer representing lenders opposing Chrysler's plan to keep their identities secret for some time, saying those who were public had received death threats.
Gonzalez will begin hearing the plan at 2:30 p.m. ET Tuesday. Chrysler had said it would file the plan Friday, but didn't enter it into the court's computer system until Sunday night.
The plan lays out the process by which Chrysler-Fiat will buy most of the assets of Chrysler in return for $2 billion to settle $6.9 billion in secured debts.
The objecting lenders say the Chrysler-Fiat sale wrongly trumps their rights and runs afoul of bankruptcy law. Thomas Lauria, attorney for the objecting Chrysler lenders known as Non-TARP Recipients, said the investors had simply not had enough time to review Chrysler's filing.
Lauria said while the group includes two known members — Oppenheimer Funds and Stairway Capital — it has other members who want to remain unknown for now.
"People who have been identified publicly of the first lien debt in this group have received death threats, which they perceived as bona fide," Lauria said.
The Non-TARP lenders had previously said they held $1 billion in Chrysler's loans, but that was before one holdout — Perella Weinberg Partners — changed its position. Peter Pantaleo, attorney for J.P. Morgan, said 62% of Chrysler's secured lenders holding 90% of its debt had agreed in writing to Chrysler's reorganization.
Chrysler and the Obama administration have said the plan has the backing of a majority of Chrysler's creditors holding at least 70% of the secured debt — a level typically necessary to approve a bankruptcy plan.
The group also accused the Obama administration of wrongly using bankruptcy for political gain, contending that the government could not use money from the $700 billion financial industry bailout to keep Chrysler operating in bankruptcy.
The deal forces Chrysler to "manufacture the type of smaller cars the Government wants manufactured, satisfy the demands of union laborers, and protect the Government's investment in Chrysler — all components of a political agenda imposed on Chrysler's management," the group said in a filing Monday.
The company wants Judge Gonzalez to approve billions of dollars in payments to suppliers, dealers, employees and even their utilities. But the creditors' group contends their claims should supersede those of unsecured creditors such as suppliers and the UAW.
The filing suggests an argument some legal experts have been making that the strategy chosen by the government and Chrysler to sell most of the company in bankruptcy carries some risk. Under bankruptcy law, the type of sale being used by Chrysler — Section 363 — can't short-circuit the traditional Chapter 11 process.
In motions filed Sunday, the automaker laid out plans for completing the complex bankruptcy deal in 60 days or less, warning that several key parts would fall apart — including U.S. and Canadian government backing to keep Chrysler alive during bankruptcy — if there's any delay.
Under the deal, Fiat will get 20% of Chrysler, along with the right to boost its stake to 51% once it pays back all government loans. The UAW retiree health care trust fund will own 55%, and the U.S. and Canadian governments will hold the remainder.
Chrysler will use a $4.5 billion loan from the two governments to survive the bankruptcy case. With all of its plants shuttered as of Monday and no incoming revenue, the company still has to pay key suppliers and dealer sales incentives.
"Even with the help of the U.S. and Canadian governments, the Debtors (Chrysler) can sustain that support for only a short period of time," Chrysler's attorneys said in the filing. "When that period expires, so does Chrysler."
Once it emerges, Chrysler will get an additional $6 billion in loans from the two governments.
With the U.S. and Canadian governments acting as the only source of cash for the deal, Chrysler argues that the judge could begin hearing arguments to confirm the sale by May 21.
In addition to the short window of government backing, other parts of the deal require quick action by the bankruptcy court.
The sale agreement between Fiat and Chrysler can be canceled if the deal isn't closed by June 15, a deadline that can be extended a month for regulatory hurdles. GMAC, which will take over lending to back Chrysler's customers and dealers as part of the case, can withdraw from its pledge by May 16 if the process for completing the sale hasn't moved forward.