NEW YORK - A federal bankruptcy judge has approved the sale of most of Chrysler L.L.C.'s assets to Italy's Fiat Group S.p.A., moving the American automaker a step closer to its goal of a quick exit from court protection.
But three Indiana state pension and construction funds filed an appeal, saying that the judge's ruling sets aside the rights of the company's secured lenders while doling out the company's assets to others.
Judge Arthur Gonzalez said in his ruling late Sunday that a speedy sale - the centerpiece of a restructuring plan backed by President Obama's automotive task force - was needed to keep the value of Chrysler from deteriorating and would provide a better return for the company's stakeholders than if it had chosen to liquidate.
"Any material delay would result in substantial costs in several areas, including the amounts required to restart the operations, loss of skilled workers, loss of suppliers and dealers who could be forced to go out of business in the interim, and the erosion of consumer confidence," Gonzalez wrote in his opinion.
Obama released a statement yesterday saying that Gonzalez's decision "paves the way for the new Chrysler to successfully emerge from bankruptcy as a new, stronger, more competitive company for the future."
The president noted the significant sacrifices made by all of the company's stakeholders.
"We said this process would be completed quickly and efficiently, and that's exactly what has been accomplished," he said.
Gonzalez's ruling came after three marathon days of testimony last week.
Chrysler, of Auburn Hills, Mich., has maintained that selling the bulk of its assets to Fiat is the only way it can avoid selling itself off piece by piece. In exchange for a stake in the new Chrysler, Fiat has agreed to share with it the technology it needs to create the smaller, more fuel-efficient vehicles now craved by U.S. drivers.
With the approval of the sale, Chrysler could emerge from Chapter 11 bankruptcy protection as soon as this week.
The three Indiana funds, which own $42.5 million of Chrysler's $6.9 billion in secured debt, aggressively objected to the sale, saying that it does not provide a big enough return for holders of secured debt, while paying off unsecured stakeholders. Secured debt is backed by collateral.
The Indiana funds bought their debt in July 2008 for 43 cents on the dollar. It is unclear how much their appeal could delay the sale's closing.
Chrysler has said that any delay could cause the deal with Fiat to crumble. The Italian automaker has the option of pulling out if the sale does not close by June 15.
In the days before Chrysler's Chapter 11 filing, the automaker struck a deal with the majority of secured lenders to give them $2 billion in cash, or 29 cents on the dollar, to erase the $6.9 billion in debt. But some of the debt holders balked and the automaker was forced to file for bankruptcy protection April 30.