As expected, the first salvo in the Chrysler war was fired today by the now infamous and much maligned Non-TARP secured lenders (the group represented by Tom Lauria of White & Case). Just hitting the Chrysler bankruptcy docket is an objection filed by W&C on behalf of its clients, objecting to the 363 asset sale. The filing is attached below (and linked here). Some very harsh language with regards to Uncle Sam in there. And as a lot of lawyers were working all night to put this together, the filing includes the following loophole "The Preliminary Objection was filed on very short notice. The Chrysler Non-TARP Lenders reserve the right, and intend, to submit a more detailed objection as time permits." As this case will be flying at alarming speed, expect to see a lot of hypercaffeinated, underslept lawyers on speed at the court hearings.
Some highlights from the filing:
Separate and apart from the lack of due process and any infirmities in the bidding procedures themselves, the Sale Motion should be denied because it seeks approval of a sale that cannot be approved under the Bankruptcy Code. In short, the Court should not permit a patently illegal sales process to go forward. Among other things, the sale proposed by the Debtors constitutes an impermissible sub rosa plan of reorganization that strips the Chrysler Senior Lenders of the protections of section 1129(a) of title 11 of the United States Code (the “Bankruptcy Code”) and improperly attempts to extinguish their property rights without their consent. Further, the sale does not comply with section 363(f) of the Bankruptcy Code and was not proposed in good faith. Indeed, the sale is far from an arm’s length transaction, but rather, is the result of a tainted sales process dominated by the United States government. Under these circumstances, the Sale Motion should be denied.
The summary of the grounds for the objection:
1. The Proposed Sale Constitutes an Illegal Sub Rosa Plan that Redistributes Value Among Creditor Classes.
2. The Proposed Sale Fails the Requirement of Section 363(f).
3. The Sale Is Not Proposed In Good Faith.
4. The Taking of Collateral through a Direct or Indirect Use of TARP Authority is Unconstitutional. (This one is Huge as it sets a case law precedent.)
The issue at play here is that Judge Gonzalez will have to step into a role as a constitutional lawyer much more so than a bankruptcy judge, which should make i) his life interesting over the next 30 - 3000 days (depending on how long the case drags for), and ii) the hearing of the 363 asset sale more fun and exciting than any soap opera on TV. We will keep readers posted on when that is slated to occur.