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Tuesday, May 26, 2009

Ind. Gov't. - Still more on: "Pension Funds Object to Chrysler Sale, Want Trustee"

"GM creditors watch Chrysler lawsuit" is the headline to a story by Bernard Simon in Toronto and Nicole Bullock of Financial Times dated May 25th:

Similarly, the Chrysler creditors, a group of three Indiana pension funds with secured claims, contends that Chrysler, guided by the Obama administration’s auto industry task force, has violated their legal rights by offering them less favourable terms than the UAW.

Tom Lauria, a partner at White & Case, who is representing the Indiana funds, said that the case could be “a template for levelling the playing field” in the two restructurings. Mr Lauria is also in talks with a newly formed group of GM bondholders contemplating legal action.

In dealing with the GM bondholders, the administration is torn between two compelling arguments. On one hand, a speedy restructuring could be vital to GM’s survival, including the jobs of its 112,000 North American employees, as well as the stability of thousands of parts suppliers and dealers.

But many of GM’s estimated 200,000 bondholders are small investors with far more public sympathy than the banks and hedge funds that had protested against the terms of Chrysler’s restructuring. The small investors own about a fifth of the $27bn outstanding. * * *

Most of Chrysler’s other creditors succumbed to political pressure this month to acquiesce in a plan that would enable a “new” slimmed-down Chrysler to emerge from bankruptcy protection in an alliance with Italy’s Fiat.

The bankruptcy court is expected to approve the deal tomorrow, paving the way for the new company to emerge from Chapter 11.

The Indiana funds will present their case to a district court in New York. Should the district judge decide the case belongs in bankruptcy court, the funds can still raise objections at tomorrow’s hearing.

Indiana’s state treasurer Richard Mourdock said he had been barraged by critical e-mails since the pension funds challenged the Chrysler deal last week.

"Chrysler slams Indiana State Treasurer's demands" is the title of this Reuters story dated May 25th:
NEW YORK, May 25 (Reuters) - U.S. automaker Chrysler on Monday slammed Indiana State Treasurer Richard Mourdock as making demands that would ultimately push the carmaker into liquidation -- resulting in the loss of more than 4,000 jobs and 9,000 retiree pensions in Indiana alone.

Mourdock, who oversees pension funds invested in Chrysler debt, has objected to Chrysler LLC's plan to quickly sell itself in bankruptcy, claiming it is a dangerous path that would hurt pensions for thousands of his state's retirees.

The Indiana pension funds have filed court papers requesting that an examiner be appointed to investigate Chrysler's business decisions, and that the company be placed in the hands of a Chapter 11 trustee who can act independently of the government. The funds also mounted a challenge to the company's plan in U.S. District Court.

Chrysler claimed in a statement on Monday that Mourdock, a Republican, is willing to put Chrysler in liquidation over less than 1 percent of the three funds' assets.

It calculates that the combined Chrysler-related investments in the three state pension funds in question totaled approximately $17 million and the cumulative loss under the proposed deal would be about $2 million.

"The treasurer's actions lead one to wonder if his motives are financial or political," the statement said.

NPR's Morning Edition has this story:
The Chrysler bankruptcy proceedings have been moving quickly and smoothly. In fact, the automaker has a hearing Wednesday that could help a new, healthier version of the company emerge from court next month. But some legal scholars say the rights of people who loaned Chrysler money have been trampled in the process.
Listen here.

Posted by Marcia Oddi on May 26, 2009 07:53 AM
Posted to Indiana Government