The Work

June 1, 2009 12:07 PM

Remember Chrysler? The "Bush v. Gore of Bankruptcies" Is Over--Kind Of

Posted by Zach Lowe

Could it possibly be this simple? Could the reorganization of Chrysler really be over just a month after it filed for bankruptcy protection? 

The short answer is "yes," according to Douglas Baird, a professor at the University of Chicago Law School and one of the nation's leading bankruptcy experts. Judge Arthur Gonzalez of U.S. bankruptcy court in New York on Sunday approved the section 363 sale of Chrysler's best assets to a new management team headed up by Fiat, according to CNNMoney and the Washington Post. That new company, majority-controlled by the United Auto Workers, is now free to set up shop and do business, Baird says. 

Baird adds that Chrysler's counsel at Jones Day were "very aggressive" in setting up bidding requirements that made it difficult or unappealing for any other bidders to compete with the Fiat group in a true auction. The conditions included requirements that any bidders put up more money than the $2 billion offered up by the Fiat group, and that the bidder assume all collective bargaining contracts and union health and benefits plans. 

Several groups--including a few junior creditors and dealers slated for closure--filed objections to the plan, but Judge Gonzalez approved the sale in its entirety. 

Baird says he was surprised that Gonzalez provided so little "push back" in dealing with the Chrysler sale. But he says that, given the heavy involvement of the Obama administration, this is really "the Bush v. Gore of bankruptcies," a one-time deal defined by extraordinary circumstances. "There would have been more serious objections had this been a real case," Baird says. 

Of course, the actual bankruptcy proceedings will drag on "for years" as the court disposes of the assets not included in the Fiat deal and settles litigation. But even that process will be simple, since there just won't be any money for creditors below the top unsecured lenders and the secured lenders who agreed to take 29 cents on the dollar as part of the government-orchestrated deal.

"The money just isn't there," Baird says. 

As for the speed of the deal, to Baird's knowledge, the Chrysler case now stands as the fastest-ever reorganization for a company of its size, besting American Airlines' purchase of TWA out of bankruptcy court in 2001. 

Top that, GM.

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