Fiat already concerned for "deteriorating" Chrysler

By Emily Chasan and Caroline Humer

NEW YORK (Reuters) - Italian carmaker Fiat SpA (FIA.MI) said in court papers on Friday that it is "already concerned" about the "deteriorating value" of Chrysler's assets and that a U.S. district court should not obstruct its sale process.

Chrysler, its creditors' committee, and Fiat filed a series of court documents on Friday, asking the U.S. District Court in Manhattan to reject a request by a group of Indiana state pension funds that the district court intervene in the bankruptcy case and postpone the sale of Chrysler's assets.

"Any material delay in the implementation of the bidding and sales process that the Bankruptcy Court has carefully but expeditiously set in motion will destroy Chrysler, put hundreds of thousands of people out of work, and devastate communities in both the United States and Canada," Chrysler said in court documents.

Chrysler has a government deadline of June 15 to close the transaction to sell itself to a "New Chrysler" owned by the U.S. and Canadian governments, Chrysler's union and Fiat, according to court papers. Chrysler's unsecured creditors' committee said in court papers on Friday that if the sale was not able to go forward it would mean certain liquidation for the iconic U.S. carmaker.

DETERIORATING VALUE

Fiat, however, said that any delay to the sale process "could ultimately prove fatal" to Fiat's plan to revive Chrysler. It said it already has concerns about the value of the assets "New Chrysler" is expected to acquire from "Old Chrysler" as the company's plant shutdown is affecting its suppliers and dealer networks.

Chrysler's financial advisory firm said in separate bankruptcy court documents on Thursday that, based on updated financial information, the financial recovery for lenders and the U.S. government would be worse under a liquidation scenario than it previously thought.

In the documents, Capstone Advisory Group said the company's first lien, or most senior lenders, would have recovered 18 percent of their investment at the most and zero at the worst in two different liquidation scenarios based on its cash balance as of April 30.