Chrysler gets urgent court approval for loan

May 6th, 2009 - 2:19 am ICT by IANS  

Barack Obama Washington, May 6 (DPA) Perched on the brink of collapse, Chrysler LLC. crept forward Tuesday with approval by a US bankruptcy judge to start drawing down from a government loan to pay outstanding bills.
The funds would come from a $4.5-billion bankruptcy loan from the US Treasury Department, Bloomberg reported.

“There isn’t going to be tomorrow if there is no DIP loan today,” US bankruptcy judge Arthur Gonzales said in approving the so-called debtor-in-possession financing at a Manhattan hearing.

Chrysler is on a fast track through bankruptcy court, with pressure from US President Barack Obama to rush the process in an unusually short 60 days.

After the private investor group Cerberus Capital Management and Germany’s Daimler withdrew their remaining stake in the ailing car maker, future ownership will rest on the triad of the US government, autoworker unions and Italy’s Fiat car maker.

Chrysler plans to sell most of its assets into a new entity that would be managed by Fiat SpA, unless it receives a higher offer at a court-supervised auction required in bankruptcy reorganization.

Gonzales’ approval of up to $1.8 billion from the government loan was opposed by a smaller group of Chrysler lenders - the same group that forced Chrysler into bankruptcy last week by rejecting the offer of about 30 cents on the dollar to settle about $6.9 billion of outstanding debt.

The larger lenders were ready to accept the deal. Obama chastised the holdouts, saying they were unwilling to make sacrifices and not even acting in their own interest.

On Tuesday, an attorney for the smaller banks, Thomas Lauria, insisted that the $1.8 billion loan would open the door to an illegal sale of assets. The smaller banks appear to be hoping for liquidation of the company so they can cash in on its assets.

Peter Pantaleo, an attorney for JPMorgan, one of the larger banks that had accepted the cash settlement, quipped: “They got outvoted, they lost. We support the DIP financing, we don’t support the alternatives and we certainly don’t support liquidation.”

By accepting the government loan, Chrysler must agree to complete its asset sale to Fiat in less than 60 days or find another buyer.

Chrysler is hoping that that the pro-forma bankruptcy auction can be finished by the end of May, with a May 15 deadline for bids and a May 21 hearing for the court to approve the sale.

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