Chrysler May Seek Approval to Sell Assets by May 22

Chrysler May Seek Approval to Sell Assets by May 22

May 3 (Bloomberg) -- Chrysler LLC, under orders by President Barack Obama to conduct a quick bankruptcy, may ask court approval to auction most of its assets in three weeks, a person familiar with the matter said.

Chrysler said it would ask a judge tomorrow to approve the sale, creating an alliance with Italy’s Fiat SpA, according to a filing yesterday with the U.S. Bankruptcy Court in Manhattan. The transaction would help create the world’s sixth-largest carmaker, a merger Chrysler wasn’t able to do outside bankruptcy because of opposition by some of its secured lenders.

The company is asking U.S. Bankruptcy Judge Arthur Gonzalez, who is in charge of the case, to approve an auction quickly. Chrysler wants a schedule that would require creditor objections to the sale to be submitted by May 11 and an auction held by May 22, the person said, asking not to be identified because the plan is confidential until announced.

Under bankruptcy law, offers for bankrupt companies or their assets are generally subject to the possibility of higher bids at a court-supervised auction.

Greenhill & Co., the financial adviser Chrysler hired in March, said the Fiat deal was fair.

“No potential buyers have expressed an interest in acquiring Chrysler as a going-concern as an alternative to the proposed transaction with Fiat,” Greenhill managing director, Bradley Robins said in an affidavit filed with the court supporting the sale. “Chrysler has insufficient funds to continue operating and no other providers of financing.”

Lead Bidder

The new entity, yet unnamed, will be the lead bidder in the auction and offer $2 billion for most of Chrysler’s assets, while assuming some liabilities, the person said. The new company would be owned by an employee association, Fiat, the U.S. Treasury and the Canadian government, Chrysler has said. Fiat’s 20 percent stake could be increased to 35 percent if the company meets certain milestones, the company has said.

The U.S. Treasury is providing a $4.5 billion bankruptcy loan to help Chrysler reorganize. Loan terms require the company to complete an asset sale to Fiat or close another comparable deal in less than 60 days, a timeframe personally set by Obama.

Chrysler, based in Auburn Hills, Michigan, must win approval of auction rules by May 9 and receive any competing offers by May 20, the person said. Following the auction, the sale must be completed by June 27, according to the person.

The automaker filed for Chapter 11 bankruptcy April 30 after a group of 20 secured lenders rejected an offer by the U.S. government that would have paid them $2.25 billion for $6.9 billion of debt, or 33 cents on the dollar. Chrysler’s 22 U.S. factories with about 26,800 hourly workers were idled May 1.

Fifth-Largest Bankruptcy

Chrysler, in its April 30 filings, listed assets of $39.3 billion and liabilities of $55.2 billion, making it the fifth- largest bankruptcy in U.S. history, according to data compiled by Bloomberg News.

The U.S. Treasury and the Canadian government have agreed to provide a total of $6 billion in taxpayer money to the Chrysler-Fiat alliance to start and maintain operations, according court filings.

Chrysler operations that aren’t sold would receive about $200 million through the bankruptcy loan “to run a safe, prudent and orderly wind down and sale,” the company said in court filings. Those assets will include eight manufacturing plants and related machinery with a book value of about $2.3 billion, according to a Chrysler executive’s affidavit filed with the bankruptcy court.

The case is In re. Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

BLOOMBERG