Satisfying the Indiana state treasurer’s demands would lead to the liquidation of Chrysler, resulting in the loss of more than 4,000 Chrysler jobs and 9,000 retiree pensions in Indiana alone, the automaker said in a statement.
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State treasurer Richard Mourdock is protesting Chrysler’s Chapter 11 proceeding and sale on behalf of three state pension funds that he oversees.
“Chrysler strongly believes Indiana Treasurer Mourdock’s position is wrong,” the automaker said.
The combined Chrysler-related investments in the three state pension funds in question totalled approximately $17m. The cumulative loss on these investments under the proposed transaction would be approximately $2m. Chrysler’s liquidation analysis shows first lien lenders would get between zero and 18 cents on the dollar in liquidation, versus 29 cents in the proposed transaction. However, Chrysler believes this range is unlikely and that there is low probability of a high-side outcome. The company believes it is more likely to be on the very low end, as for the entire time that Chrysler has been in Chapter 11, it has had very few bids for its assets. Thus, under a liquidation scenario, the loss to Chrysler’s employees, suppliers and dealers would be far more: in the tens of billions of dollars.
Treasurer Mourdock has said that he takes his “oath of office and fiduciary responsibilities very, very seriously.”
But Chrysler believes treasurer Mourdock is risking significantly further loss, and would be living up to his fiduciary responsibilities by accepting the terms that 98% of other creditors accepted.
“The treasurer’s actions lead one to wonder if his motives are financial or political,” the automaker said.
Chrysler has a government deadline of 15 June to close the transaction to sell itself to a ‘new Chrysler’ owned by the US and Canadian governments, the UAW and Fiat, according to recent court papers cited by Reuters.
Chrysler’s unsecured creditors’ committee has said in court filings that if the sale were not able to go forward it would mean certain liquidation.
Chrysler, its creditors’ committee, and Fiat have filed a series of court documents asking the US District Court in Manhattan to reject a request by the pension funds that the court intervene in the bankruptcy case and postpone the sale of Chrysler’s assets.
