Appeals court block Chrysler deal to hear Indiana pension argument

Washington Post:

A federal appeals court agreed late Tuesday night to hear an appeal from a group of lenders seeking to block the sale of Chrysler's assets, a move that could delay the automaker's exit from bankruptcy proceedings.

The U.S. Court of Appeals for the Second Circuit accepted the appeal from a coalition of Indiana pension funds that has sought to block the sale of most of Chrysler's assets to a group led by Italian automaker Fiat, according to Chris Conner, spokesman for Indiana State Treasurer's Office.

A hearing is scheduled for Friday, Conner said.

The funds, which hold about $42 million of Chrysler's $6.9 billion in secured debt, claim the terms of the sale violate their rights as secured lenders by limiting their ability to recover all of their original investment in the company.

The appeal throws an element of uncertainty into the Obama administration's carefully orchestrated plan to speed the ailing automaker through bankruptcy court.

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I think they have a good argument. Secured creditors are suppose to get paid first unless they have signed a subordination agreement. What the government and the unions are doing is getting in line ahead of people who have a prior interest in the assets of Chrysler. This position by the Obama administration and the unions is already driving up the cost of borrowing for companies with unions or who have borrowed money from the government.