A U.S. bankruptcy judge in New York cleared the way late on May 5 for the fast-track sale of collapsing auto giant Chrysler, with Fiat as the lead bidder. After a nearly eight-hour hearing, Judge Arthur Gonzalez rejected arguments from a group of Chrysler creditors who called "illegal" the U.S. government-backed restructuring plan unveiled on April 30.
The decision sets Fiat up to rescue Chrysler from collapse in a deal pushed by President Barack Obama.
Gonzalez stressed the "urgent need for the sale to be consummated," but insisted that other bidders -- if any emerge -- will still be able to compete.
A May 20 deadline was set for any rival bids and the court will approve the sale May 27. The deadlines -- due to be formalized on May 6 by Gonzalez -- were extended by about a week after the lenders complained in court that the restructuring plan was being rushed through.
Obama's administration has set a June 1 deadline to reach a deal to keep Chrysler out of liquidation. Under the plan, Chrysler aims for a "surgical" bankruptcy to wipe out a portion of its debts, allowing the creation of a new company tied to Fiat.
The small group of creditors trying to derail the deal argued they were being treated unfairly and that the restructuring had been all but sewn up in advance by the White House. However, Gonzalez accepted Chrysler's argument that the rapid timetable gives the Detroit giant its one chance to survive.
"Chrysler is a wasting asset. Every day, we're talking about hundreds of millions of dollars," Chrysler lawyer Corinne Ball said.
Fiat lawyer Hydee Feldstein said the deal would create "a phoenix rising from the ashes."
Thomas Lauria, representing the group of dissenting lenders, countered however that "not one witness has testified that the procedures are reasonable."
"The procedures proposed are at best confusing ... or at worst could be interpreted as designed ... (to block) competing bids," he said. "How can a buyer ... possibly do the diligence that would be required? It's impossible and I don't think the court needs a witness to tell it that."
The group of creditors had asked Gonzalez to keep their identities secret, saying they faced "threats" to their safety. Gonzalez turned down the application, saying their claims of death threats amounted to no more than a handful of anonymous outbursts on the Internet. He ordered the creditors to reveal their identities by midday on May 6.
The new firm would be majority owned by the United Auto Workers (UAW) union, with small stakes by the U.S. and Canadian governments, which would contribute $10.5 billion to the venture. Fiat would initially take a 20% stake in the firm that would rise to 35% and could reach 51% as early as 2013 if Chrysler is able to repay its government loans.
Copyright Agence France-Presse, 2009