Chrysler lender group plans objection to sale

By Emily Chasan

NEW YORK (Reuters) - A group of about 20 lenders that balked at the terms of a government-brokered deal to cut Chrysler LLC's $6.9 billion debt, are now planning to object to the company's planned bankruptcy sale, their attorney said on Thursday.

Chrysler LLC filed for Chapter 11 bankruptcy protection in New York on Thursday, saying that it would sell its core assets including its Chrysler, Jeep and Dodge brands into a new company that would be owned by the U.S. government, Fiat SpA and the company's workers.

The plan, however, depends on U.S. Bankruptcy Court approval of the sale, and this group of lenders feels the current plan to sell those assets within 30 to 60 days may infringe on their legal rights.

"We're just standing on the law," said Tom Lauria, a bankruptcy attorney at White & Case, representing a group of about 20 Chrysler first lien senior secured lenders.

"They (Chrysler) say they are going to allocate out and distribute the proceeds of the sale in a way that they couldn't do if they were going to do it under a Chapter 11 plan," he added.

The group of lenders Lauria represents includes Oppenheimer Funds, Stairway Capital and other secured lenders who have their own group of investors, including teachers' credit unions, pension funds, retiree plans, college endowments, and retirement funds.

He said the group understands the need for Chrysler to sell itself and for the industry to restructure, but owes a fiduciary duty to its investors and objects to the way Chrysler is trying to divvy up the proceeds of the bankruptcy sale without putting it to a creditor vote.

"This is not an objection to rescuing Chrysler, Lauria said.