This is now getting interesting. Conventional wisdom among most bankruptcy commentors was that the objections to the Chrysler deal were not strong from a legal standpoint. Thus the fact that the Supreme Court has decided to stay the deal comes as a surprise, particularly to Team Obama, which has put its prestige and considerable muscle behind getting the deal done. And any complications or delay with Chrysler puts the much larger and more complex GM bankruptcy at risk.
The deal with Fiat requires that the transaction close by June 15.
From Bloomberg:
Justice Ruth Bader Ginsburg ordered a delay in Chrysler LLC’s planned asset sale to a group led by Italy’s Fiat SpA while the U.S. Supreme Court considers a request for a longer postponement that might scuttle the deal…. Indiana pension funds and consumer groups asked for an order blocking the sale while the Supreme Court decides whether to take up the funds’ appeal.Ginsburg’s one-sentence order, which came only in the pension fund case, said the bankruptcy court orders allowing the sale “are stayed pending further order” of the Supreme Court.
Chrysler said in court papers that the sale is necessary to stanch losses of $100 million a day.
Yves here. I would assume Chrysler made a more compelling from a legal standpoint than “we really need the deal done.” But maybe not (apologies for not independently checking the filings, but Internet access continues to be dreadful). From the Wall Street Journal:
Ahead of the decision, Chrysler and the federal government warned such an intervention might lead to the liquidation of the auto maker….“There is no other bidder for Chrysler’s assets,” an attorney for Chrysler said in a legal brief. “The only other viable alternative for Chrysler is to proceed with a liquidation that will return no more than $800 million for all constituents.”
The appeals were filed over the weekend after the Second U.S. Circuit Court of Appeals in New York approved the acquisition of most of Chrysler’s assets by a group led by Fiat. The appeals court stayed the sale until Monday so the funds could make their case to the Supreme Court. A U.S. bankruptcy judge early last week approved the transaction…
A lengthy delay for a Chrysler-Fiat transaction would jeopardize jobs and tarnish President Barack Obama’s efforts to save Chrysler and General Motors…
According to a Chrysler filing, the Indiana pensions challenging the deal are set to lose $5 million dollars under the terms of the Fiat purchase. The pension funds, in their own filing, put their losses in the “millions of dollars.”
The pension funds argued the sale, orchestrated by the U.S. and Canadian governments under bankruptcy laws, was illegal and that the federal government exceeded its bailout authority with its involvement. “The negative economic consequences of permitting an unlawful sale to proceed may well over time dramatically outweigh Chrysler’s short-term harm,” the funds said.
Update 3:00 AM: The commentary in the media suggests that the prevalent view is that the deal will still go ahead, and with not much delay. From the New York Times:
The delay could be resolved by Tuesday, freeing Chrysler to join forces with Fiat. But if the court decides 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 June 15.In a broader context, such a decision would also give the justices an early opportunity to consider the scope of the wide-ranging but not unlimited authority that Congress granted the president to address the economic crisis…..
Several legal experts noted that the action should not be interpreted as a signal of the full Supreme Court’s intentions. And it is not unusual for the court to issue a stay while it considers whether to hear a case, but it rarely grants 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,” said David A. Skeel Jr., a law professor at the University of Pennsylvania. “I think it’s a good move. My guess is in the end they will approve the sale.”
The Financial Times noted the upbeat reading from Team Obama versus the possibility of the deal gong pear shaped:
…people close to the Obama administration’s car industry task force and Chrysler suggested that the stay was not a catastrophe and that the sale was likely to proceed as planned. “We understand this to be an administrative extension designed to allow sufficient time for the Court to make a determination on the merits of the request for a stay,” said an administration official….Elena Kagan, US solicitor-general, said in a brief opposing the Indiana funds’ request that unless the Supreme Court was able to complete a full review of the Fiat deal by the deadline, a stay order “could itself have the effect of preventing the sale from going forward”.
metabear73 
Posts
Those bankruptcy commentators are full of BS.
The rule of laws were broken when this deal was made. The SCOTUS made the right decision.
Stop government looting!