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.