8 Jun 2009

US Supreme Court asked to stop Chrysler sale

3:56 pm on 8 June 2009

Pension funds opposed to the sale of Chrysler to Fiat have asked the United States Supreme Court to block the deal immediately.

Three Indiana state pension and construction funds filed papers at the court on Sunday calling for the sale to be halted so they can pursue an appeal.

A US appeals court last week approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the US and Canadian governments.

Chrysler entered bankruptcy protection in April after a massive slump in sales due to the recession.

The US government has backed the sale to the Fiat-led consortium, which would enable it to emerge from bankruptcy.

Fiat would control 20% of Chrysler, while 68% would be owned by a union trust. The two governments would share 12%.

However, the pension funds, which hold about $US42 million of Chrysler's $US6.9 billion in secured loans, are opposed to the sale.

They say it inverts usual bankruptcy practice and unlawfully rewards unsecured creditors, such as the union, ahead of secured lenders.

The BBC reports the emergency legal application is from the Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund and the state's Major Moves Construction Fund.

If the deal is not completed by 15 June, Fiat, which is not paying anything for its 20% stake, has the option of pulling out.