Lenders' attempt to block Chrysler deal is overruled

Judge Arthur Gonzales, who is overseeing the bankruptcy of Chrysler, is allowing the sale of the ailing US automaker to Italian rival Fiat, after rejecting arguments from a group of Chrysler lenders who wanted the deal blocked. ┬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 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, but Judge Gonzales ultimately concluded that the restructuring plan was a "fair and ordinary" process and stressed the "urgent need" for a sale. ┬á Michigan Governor Jennifer Granholm has described the creditors as "greedy hedge funds," and Representative John Dingell, a Michigan Democrat, has labeled them as "vultures." ┬á The lenders stance in the negotiation has also 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."