June 4, 2009 in Business

Appeals court halts Chrysler assets sale

Indiana funds allege ‘illegal acts’ by feds
Associated Press
 

NEW YORK – A federal appeals court has halted Chrysler’s sale of the bulk of its assets to Italy’s Fiat pending an appeal by a trio of Indiana state pension and construction funds.

The U.S. Court of Appeals for the 2nd Circuit said Tuesday it will hear arguments in the case Friday, according to the Indiana treasurer’s office.

“We are pleased the Court of Appeals has agreed to hear our arguments,” Indiana Treasurer Richard Mourdock said in a statement. “As we have stated from the beginning, Indiana retirees and Indiana taxpayers have suffered losses because of unprecedented and illegal acts of the federal government.”

The funds, which include the Indiana State Police Pension Fund, the Indiana Teachers’ Retirement Fund, and the state’s Major Moves Construction Fund, claimed that the deal as structured unfairly favors the interests of the company’s unsecured stakeholders ahead of those of secured debt holders such as themselves.

They also challenged the constitutionality of the federal Treasury Department’s use of Troubled Asset Relief Program funds to supply Chrysler’s bankruptcy protection financing.

Late Sunday, U.S. Judge Arthur Gonzalez, the bankruptcy judge overseeing Chrysler’s case, approved the sale. He also ruled that the funds do not have the standing to challenge the use of TARP money because they will receive their fair share of the $2 billion set aside for secured debt holders, which is more than they would have received if Chrysler had liquidated.

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