(CN) – In a defeat for Indiana pensioners, the 2nd Circuit upheld a bankruptcy judge’s approval of Chrysler’s sale to Italy’s Fiat.
The court upheld the June 1 order of U.S. Bankruptcy Judge Arthur J. Gonzalez, which allowed the troubled automaker to unload its $6.9 billion in debt. Chrysler’s secured debtholders – including Indiana police, teachers and a state construction fund – received $2 billion in cash, or about 29 cents on the dollar.
Chrysler filed for Chapter 11 bankruptcy at the end of April, after receiving billions in federal bailout money.
The New York-based appeals court affirmed Gonzalez’s approval of the sale on June 5, but granted a stay pending Supreme Court review. After an initial extension of the stay, the Supreme Court declined to intervene in the bankruptcy settlement.
The sale closed on June 10.
The 2nd Circuit dismissed the Indiana groups’ challenges to the order, saying their claims are “without merit.”
“[H]ad appellants successfully blocked the sale, they would have been unsecured creditors fighting for a share of extremely limited liquidation proceeds,” Chief Judge Dennis Jacobs wrote for the three-judge panel. “Given the billions of dollars of outstanding secured claims against Old Chrysler, appellants would have fared no better had they prevailed.
“With its revenues sinking, its factories dark, and its massive debts growing, Chrysler fit the paradigm of the melting ice cube,” Jacobs wrote.