Monday, June 08, 2009

Supreme Court Delays Sale of Chrysler

And it was going to be a done deal today. The best laid plans....

The U.S. Supreme Court today indefinitely delayed the sale of most of Chrysler LLC's "good assets" as it continued to review whether to accept an appeal from a group of secured creditors -- a move that throws into jeopardy a tie-up with Italian automaker Fiat SpA.

The one-sentence ruling means the nation's highest court is seriously considering whether to hold up Chrysler's emergence from bankruptcy. The order from Justice Ruth Bader Ginsburg postponed Chrysler from exiting until the court had more time to consider the case.
Administration no happy. Making ominous noises.

"Applicants' bid to block the sale would force the liquidation of Chrysler, a step whose economic consequences would be so severe that two national governments have committed unprecedented resources to prevent it," the government said. "Granting a stay beyond Monday, June 15, jeopardizes the sale -- the only remaining alternative to the outright liquidation of Chrysler."
It's all about using TARP funds...

But the case would represent the first time the court could rule on the legality of the $700 billion Troubled Asset Relief Program, the Wall Street bailout fund that Congress approved last fall. The creditors have challenged the use of the funds for automakers.

The Treasury Department agreed to pay off secured creditors of Chrysler with $2 billion in cash for $6.9 billion in debt -- or about 29 cents on the dollar.

The Indiana funds purchased the debt at an average price of 43 cents on the dollar -- meaning they would lose roughly $13 million on their $42 million investment.
After all the billions invested here, the thought of losing this deal over $13 million is quite stunning. And would be very tragic indeed.