By David Bailey and Emily Chasan
DETROIT/NEW YORK (Reuters) - Chrysler has asked the U.S. Bankruptcy Court for a swift hearing into its planned sale to Italy's FIAT (F.IT)SpA
Chrysler filed for bankruptcy on Thursday, planning an emergence from court protection in as little as 30 days under the guidance of Obama administration officials.
The automaker asked Judge Arthur Gonzalez to set a hearing as soon as May 21 to approve a $2 billion sale of most of its assets out of bankruptcy that would clear the way for a merger with Fiat, according to documents filed with the court.
Gonzalez adjourned a hearing into Chrysler's requested sale procedure until 2:30 p.m. EDT on Tuesday.
"We still have a very fragile coalition to get from here to there," Corinne Ball, Chrysler's bankruptcy lawyer, said near the start of a court hearing on Monday.
Fiat would start with a 20 percent stake in the new Chrysler, which would grow quickly to 35 percent. Fiat Chief Executive Sergio Marchionne is expected to run the merged operations.
Chrysler also asked the Bankruptcy Court to approve a $35 million breakup fee for Fiat if the sale falls apart.
"Absent a prompt sale, approved in the coming weeks, the value of the debtors' assets will rapidly decline and the ability to achieve a going concern sale will be lost," Chrysler said in court documents supporting the sale to Fiat.
The U.S. automaker, which has been operating with $4 billion of emergency U.S. government loans, failed to reach a deal with all of its secured first-lien lenders last week to restructure its debt, forcing Chrysler into the courts.
The first-lien lenders were owed a collective $6.9 billion, and four large banks led by JPMorgan Chase & Co
JPMorgan lawyer Peter Pantaleo, of Simpson Thacher & Bartlett LLP, told the court on Monday that Chrysler had more than the required support from the secured lenders to support the proposed sale.
A group of investment funds led by Oppenheimer Funds and Stairway Capital had objected to the payout terms as unfair and filed an immediate objection on Monday asking Gonzalez to block the Fiat deal and the U.S. government's offer to provide bankruptcy financing to Chrysler.
The dissenting secured lenders said in their objection that the sale was being "orchestrated entirely by Treasury and foisted upon the debtors without regard to corporate formalities."
Tom Lauria, an attorney at White & Case who represents an ad-hoc group of the dissenting secured lenders, told the court that publicly identified group members had received death threats "which they perceive as being bona fide."
As a result, the group may seek to disclose its membership to the court under seal, Lauria said. Lenders who received death threats have notified police and the FBI, he said.
The case is in re Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002.
(Reporting by Kevin Krolicki and David Bailey, editing by Dave Zimmerman and Matthew Lewis)
