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The Chrysler Non-TARP Lenders,1 by and through their undersigned counsel,
hereby file this preliminary objection (the “Preliminary Objection”) to the Motion of Debtors and
Debtors in Possession, Pursuant to Sections 105, 363 and 365 of the Bankruptcy Code and
Bankruptcy Rules 2002, 6004 and 6006, for (I) An Order (A)
Approving Bidding Procedures and
Bidder Protections for the Sale of Substantially All of the Debtors’ Operating Assets
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 sale of assets by the Debtors to New Chrysler is not a sale that was
negotiated by independent parties at arm’s length. Rather, it is a sale that was orchestrated
entirely by the Treasury and foisted upon the Debtors without regard to corporate formalities, the
fiduciary duties of the Debtors’ officers and directors or the other important checks and balances
typically found in good faith sales. Indeed, well before the filing, the Debtors had ceased to
function as an independent company and had become an instrumentality of the government.
President Obama, in his public statements, made it clear that the Debtors would be required to
pursue the sale transaction with Fiat and ordered the Debtors to cease all efforts to pursue any
other transaction.
Both actions are clearly inconsistent with the requirements of a good faith
sale. And, the government exerted extreme pressure to coerce all of the Debtors’ constituencies
into accepting a deal which is being done largely for the benefit of unsecured creditors at the
expense of senior creditors. Under the circumstances, the sale transaction does not pass muster
under section 363(n), let alone section 363(m), and New Chrysler simply cannot establish that it
is a good faith purchaser in connection with the proposed sale.
Here, the proposed sale of the Debtors’ assets will leave the Senior
Lenders
with a diluted pool of assets and no further interests in the operating assets covered by
their specific liens. The Constitution forbids this application of a law retroactively to undercut
the Senior Lenders’ pre-existing property rights in favor or inferior creditors.
