The U.S. Court of Appeals for the Second Circuit in New York City said the sale of Chrysler to Fiat SpA can proceed next Monday unless the Supreme Court intervenes by 4 pm.
A three-judge panel dismissed the arguments from the State of Indiana Friday afternoon, which holds a miniscule portion of less than 1% of Chrysler’s debt.
The outcome was predictable. And it is likely the Supreme Court will allow the Chrysler sale to proceed next week. Justice Ruth Bader Ginsburg handles appeals from the Second Circuit. She has the power to dismiss the appeal outright. She can also present the matter to the entire court. The U.S. Supreme Court rarely hears emergency appeals, such as the one coming from Indiana.
In the Bankruptcy Court decision that was immediately appealed by Indiana, the presiding judge cited Congressional laws going back to the 19th century to dismiss the dissident bondholders’ claims.
Now the Appeals Court has upheld the Chrysler sale decision, which allowed the sale to proceed just 31 days after the case was filed. The original decision applies basic and well-known fundamental principles of bankruptcy law.
As a result, Fiat will get the assets related to the research, design, manufacturing, production, assembly and distribution of passenger cars, trucks and other vehicles, including prototypes, under brand names that include Chrysler, Jeep and Dodge. The New Chrysler Group will be largely free of previous obligations, allowing it in theory to make a profit at current depressed sales levels.
Both decisions use common sense and law to dismiss arguments from lawyers for the debtors. Simply put, a sale of Chrysler, backed by funding from U.S. taxpayers, is the only way to give Chrysler a chance – and it is just a chance – to survive. This “preserves the estate,” allowing the largest possible settlement for all involved, including bondholders. No other bidders for Chrysler emerged during the 363 sale process, which is named for the section of the U.S. Bankruptcy code that describes the procedure.
In his 47-page decision Judge Gonzales wrote: “the Court finds that all relevant standards have been established to grant the relief requested (the sale of Chrysler to Fiat). All objections, if any, to the Sale Motion or the relief requested therein that have not been withdrawn, waived, or settled as announced to the Court at the Sale Hearing or by stipulation filed with the Court, and all reservation of rights included therein, are hereby overruled.”
The swiftness of the disposition of the Chrysler matter not only confounded critics and pundits, but the precedent makes it easier for the more complicated General Motors bankruptcy to proceed along the same legal lines. Senior Obama Administration officials maintain that a New GM will emerge from bankruptcy 60-90 days after its June 1 filing.