A panel of the Second Circuit allowed the bankruptcy sale of Chrysler to Fiat for $2 billion in June. Yesterday, Their Honors issued the opinion they promised would follow.
On the main issue, the court held that the section 363(b) Sale didn't amount to a "sub rosa" reorganization because it didn't dictate terms of a later reorganization, it did guarantee creditors $2 billion (versus zero to $800 million in a liquidation), and Chrysler's failing health made the company the bankruptcy equivalent of a "melting ice cube" and thus called for action NOW to save as much of the cube as possible. Indiana State Police Pension Trust v. Chrysler LLC (In re Chrysler LLC), No. 09-2311-bk (2d Cir. Aug. 5, 2009).
The court also backhanded a prime point of hyperventilating creditors, who argued that the Sale unconstitutionally and/or unAmericanally favored Labor over Capital. The Big Boost in value to New Chrysler over Old Chrysler resulted from things that others chose to give to New but not Old, the panel pointed out:
As Bankruptcy Judge Gonzalez found, all the equity stakes in New Chrysler were entirely attributable to new value — including governmental loans, new technology, and new management — which were not assets of the debtor's estate.
Id., slip op. at 25.