Bankruptcy experts have said the surprise order last night by Supreme Court justice Ruth Bader Ginsburg putting a temporary hold on Chrysler’s sale to Fiat might simply be the judge taking time to ensure the right ruling is made.
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“I think she is just giving herself more time to read all the documents that have been filed,” Carl Tobias, who teaches bankruptcy law at the University of Richmond in Virginia, told the Detroit Free Press. “She could still decide this herself.”
Peter Henning, who teaches law at Wayne State in Detroit, agreed.
“Sometimes the court wants a breather. Give us a little time to consider it so we get it right,” Henning told the ‘Freep’.
The paper said lawyers for the Indiana pension funds had changed their argument significantly since contending in bankruptcy court that the US treasury had violated the property rights of secured lenders, which collectively held $6.9 billion in loans, by putting their interests beneath those of parties who held no or less senior debt. The treasury had offered the secured lenders only 29 cents on the dollar and no equity in the new Chrysler.
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By GlobalDataUS bankruptcy judge Arthur Gonzalez and a three-judge appeals panel had rejected that argument.
Now the pensioners’ lawyers are directly attacking the constitutionality of the Bush and Obama administrations’ decision to use money from the Troubled Asset Relief Programme (TARP) to rescue automakers, the Free Press said.
“They’re looking for their best argument. To get the court’s attention on a pure property rights issue will be difficult,” Wayne State’s Henning told the paper. “They’re asking the court to take an extraordinary step of interfering in a business transaction.”
The New York Times said the delay could be resolved by later today (9 June) but, if the court decided to hear an appeal that lasts weeks or months, it could put Chrysler at risk of going out of business.
Fiat, the only company to show an interest in acquiring most of the assets of Chrysler, can walk away from the deal if it is not concluded by 15 June but CEO Marchionne has said the automaker would “never” do that.
Several legal experts told the paper that the action should not be interpreted as a signal of the full Supreme Court’s intentions, and that it was not unusual for the court to issue a stay while it considered whether to hear a case, though it rarely granted the kind of expedited hearing on the merits that the Indiana funds are seeking.
“I’m astonished she even stayed the sale, but I find it quite encouraging, because I find it important that they take a close look at the issues,” David Skeel, a law professor at the University of Pennsylvania, told the New York Times. “I think it’s a good move. My guess is in the end they will approve the sale.”
Lawyers for the funds have questioned whether Chrysler could have received a better deal than the Fiat transaction or through a liquidation, the paper said.
