Lenders attempt to block Chrysler deal

A group of 20 lenders, including hedge funds, are unhappy with the reconstruction of Chrysler - in Chapter 11 bankruptcy protection ÔÇô and has asked a New York court to halt the process, saying the plan would go against normal bankruptcy principles. ┬á The group claimed Chrysler's proposed plan "inverts" the usual priority scheme, whereby senior secured creditors are paid in full first, followed by junior lenders, administrative claims, unsecured lenders and equity holders, and t hat the proposed procedures are not legitimate and do not maximize the sale price of the assets. ┬á Creditors also objected to the way the restructuring benefits the United Auto Workers union, which is an unsecured creditor, for the $10.6 billion Chrysler owes to its retiree healthcare fund. ┬á In addition, they have requested anonymity because they feel they are unfairly becoming the focus for a political backlash. ┬á Their stance in the negotiation has been criticized by President Obama, who called the lender group- who hold more than $300 million of secured Chrysler debt- ÔÇ£speculatorsÔÇØ last week when he unveiled the proposed Chrysler bankruptcy. ┬á "A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout," he said. ┬á "They were hoping that everybody else would make sacrifices and they would have to make none. Some demanded twice the return that other lenders were getting. I don't stand with them." ┬á Michigan Governor Jennifer Granholm has described the group's members as "greedy hedge funds," and Representative John Dingell, a Michigan Democrat, has labeled them as "vultures." ┬á Chrysler has asked for permission for a quick sale of most of its assets to a new company held by Italy's Fiat , a United Auto Workers union healthcare trust and the US and Canadian governments. ┬á Judge Arthur Gonzales who is overseeing the bankruptcy of Chrysler has rejected arguments from a group of Chrysler lenders, who wanted the deal blocked, and is allowing the sale of the ailing US automaker to Italian rival Fiat. ┬á He said that the plan was a "fair and ordinary" process and stressed the "urgent need" for a sale.