Chrysler began operating as new company today, finalizing a deal with Fiat after the U.S. Supreme Court rejected a challenge to the sale by a group of Indiana state funds.
The Chrysler pension plans are expected to be transferred to the new Chrysler, which will assume their sponsorship under the bankruptcy sale agreement, said Jeffrey Speicher, spokesman for the Pension Benefit Guaranty Corp.
We will have a statement to that effect when the transfer is complete, Mr. Speicher added.
Auburn Hills, Mich.-based Chrysler had U.S. defined benefit assets of $21.6 billion as of Sept. 30, according to Pensions & Investments Jan. 26 report on the largest U.S. retirement funds. The Chrysler plan was underfunded by $9.3 billion as of Nov. 30, according to the PBGC.
Supreme Court Justice Ruth Bader Ginsburg on Tuesday denied the appeal filed by Indiana State Treasurer Richard Mourdock on behalf of the $7.8 billion Indianas State Teachers Retirement Fund, $250 million Indiana State Police Pension Trust and $2.5 billion Indiana Major Moves Construction Fund, all of Indianapolis.
The Indiana funds claimed the Chrysler sale was unfair to secured creditors. The teachers fund holds about $32.4 million in Chrysler secured debt, the construction fund holds $8.8 million and the state police fund, $1.3 million.
Ms. Ginsburg in her two-page ruling said her denial of a stay is not a decision on the merits of the underlying legal issues of the Indiana funds case but said the funds have not carried the burden of showing that the circumstances of the particular case justify the Supreme Courts intervention.
Mr. Mourdock said in a statement today, I am disappointed in the Supreme Court ruling that lifted the stay in the Chrysler bankruptcy case thereby allowing the company to be acquired by the United States government so it may distribute its assets as it directs.
The future ramifications of the courts decision on the capital markets remain to be seen, he said in the statement.
Under the deal, most of Chrysler assets will be sold to create a new Chrysler. Fiat will initially own 20% in exchange for technology, production and distribution benefits Fiat would provide and will have the right to raise its ownership by an additional 15% upon meeting specified performance criteria. The UAWs voluntary employee beneficiary association will own 55%; the Treasury Department, 8%; and the Canadian and Ontario governments, a combined 2%. Until Fiat obtains that additional 15%, those shares will be distributed proportionately among the other equity holders, said Mike Palese, Chrysler spokesman, who added the deal to create the new Chrysler was completed this morning.
Besides the equity, the VEBA also will be funded by a $4.6 billion note payable over 13 years at a 9% interest.
The Treasury Department will lend up to $4.7 billion to the new Chrysler.