Way cleared for Fiat/Chrysler deal

A LEGAL challenge that could have delayed, perhaps derailed, the intended Chrysler deal with Fiat has been dropped, clearing the way for a speedy exit from bankruptcy for Chrysler.

Two of the five members of a dissident group of investors holding Chrysler unsecured notes withdrew from the legal challenge late on Friday night. The remainder of the group will now disband.

“It reached a point where we didn’t have a significant enough group, and it wasn’t sensible to proceed,” said Glenn Kurtz, a lawyer involved in the challenge,After Oppenheimer Funds and Stairway Capital Management pulled out, the remaining members of the group held just 2.8 per cent of the Chrysler debt.

A White House spokesman said the decision to disband was “another important and promising step in Chrysler’s favour to go through a very quick restructuring and bankruptcy and to very quickly have Chrysler and Fiat emerge together as partners to put a very storied automobile company back on a path toward viability”.

Chrysler directors also welcomed the backdown.

“We are pleased with the decision by the minority secured lenders to withdraw their opposition to Chrysler’s proposed sale to Fiat. We believe this in the best interests of all Chrysler stakeholders.”

Four large banks holding $US6.9 billion ($A9.01 billion) of Chrysler debt decided to accept the Obama administration’s offer of 29 cents in the dollar and did not join the dissident group.

Oppenheimer last week joined the group arguing that it was entitled under US bankruptcy law to more than was being offered.

Meanwhile, Chrysler has been able to pay its US dealers for all their incentive and warranty claims that had been outstanding. There had been fears that these payments may be held up when Chrysler went into Chapter 11 bankruptcy.

What’s more, Chrysler will speed up these payments in future. Previously, the company would pay incentive and warranty claims once a week, on a Monday.

The company’s chief of North America sales has told dealers their claims will be processed overnight from now on.

There was still no word on how many of Chrysler’s 3200 dealers would be retained after bankruptcy. About 2500 of them have already signed up to switch their financing arrangements to GMAC, which is now Chrysler’s designated lender.

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