DETROIT -- The horror! cried Kurtz.
Were playing the game fairly, said Ball.
If the U.S. Bankruptcy Court allows the sale of a new Chrysler to Italys Fiat S.p.A. to sail through, some would call this a victory, a triumph of sensibility over legal technicality, said Glenn Kurtz, an attorney for Indiana pension funds that hold the U.S. automakers debt.
But, he thundered, others who believe the rule of law must be observed would call this a flagrant, violent overthrow of that principle.
Baloney, countered Corinne Ball, Chrysler LLCs bankruptcy lawyer.
Chrysler has resolved many of the earlier objections to the sale by working cooperatively to address concerns of suppliers, tort claimants, taxing authorities and other parties.
The written opening statements by the two sides yesterday come across as a he-said/she-said exchange and set the stage for a high-stakes courtroom drama.
U.S. Bankruptcy Judge Arthur Gonzalez heard about nine hours of testimony yesterday before adjourning the hearing until today. He has indicated that the hearing -- perhaps the last major obstacle to a Fiat takeover of key parts of Chrysler -- could stretch into tomorrow.
This hearing may or may not address 21 objections brought by some of the 789 dealers that Chrysler intends to drop. Ball said those should be addressed at a court hearing next week and not at this weeks hearings on the proposed sale to Fiat. But if the judge wants to hear them, Ball said, she is ready to meet those objections, too.
Even before the verbal sparring began in the Manhattan court, the written opening statements and other documents from the two sides laid out the conflicting views.
Here are some of the highlights.
Throughout the hearing, Kurtz and his allies sought to portray Chryslers bankruptcy as the railroading of a government-organized fait accompli that violated the basic tenets of bankruptcy law. This was, he argued, a sub rosa, or secret, deal involving Chrysler, the U.S. Treasury Department and Fiat. And those three didnt want to bother with the niceties of law or to answer the legitimate concerns of parties who are getting the short end of the stick, Kurtz asserted.
Indeed, his opening statement began bluntly: If this is not an illegal sub rosa plan, there is no such thing.
It was a head-on attack on the Chrysler bankruptcy process. But Kurtzs law firm of White & Case LLP has banged its collective head against that wall before, to no avail.
Lawyers for the Indiana funds had made much the same argument earlier in the week in U.S. District Court before a different, nonbankruptcy judge, seeking to slow the Chrysler case. But that judge essentially said no, this is a Bankruptcy Court issue and should be tried there.
A statement by Owen Pell, a colleague of Kurtzs, buttressed the stop-the-steamroller argument.
The attorneys for the Indiana pension funds simply had not been granted enough time to build their case, Pell said. On May 19 and 20, they had requested copies of all the motions in the case from Chrysler and had served discovery requests on various parties.
They were quickly swamped.
From May 21 through Tuesday, the Indiana funds lawyers received more than 87,000 documents totaling 385,000 pages. Despite their efforts, by late evening Monday, 2,308 documents totaling more than 26,000 pages still hadnt been loaded into the law firms electronic database. Between Saturday and Tuesday, they took 23 depositions, most within the last 48 hours before the hearing, Pell said.
Another lawyer testified that some of the people that the Indiana funds lawyers wanted to depose were not available before the hearing began.
And then there were the late additions to the record.
A declaration by Robert Manzo, executive director of Capstone Advisory Group LLC, a financial advisory firm serving Chrysler, was electronically filed after 10 p.m. Tuesday. Yesterday, the day of the hearing, a statement by Chrysler Chairman Bob Nardelli was electronically filed at some time after 1:00 a.m.
A statement by James Chapman, an independent manager on the board of managers of Chrysler, came that same day at some time between 12:30 a.m. and 3:00 a.m., Pell said.
The implication: We cant prepare our arguments in the short time granted us. In the name of good bankruptcy procedures, delay this hearing and slow the Chrysler bankruptcy steamroller.
Nobodys being steamrolled, Ball countered.
Yes, the case is moving quickly, but thats because time is of the essence, and Chryslers value as a going concern deteriorates every day the automaker spends in bankruptcy, she said.
Besides, Chrysler has been listening to and negotiating with everyone.
The automakers proposed sale to Fiat and related issues drew about 350 objections, Ball said. But the actual number of live objections today likely is closer to 30 to 40, she said. She broke them down thusly:
Of the 26 tax and workers compensation objections, we believe eight are resolved, Ball said. One additional objection has been addressed and may no longer be an issue. Talks continue on the remaining claims.
Of 24 retiree complaints, many are partially resolved because the so-called new Chrysler to be sold to Fiat will assume their qualified pension and retiree health care plans.
Of 61 supplier objections, we believe 45 have been resolved.
Of 11 tort and consumer claimants, three objections have been addressed, and numerous other objections were resolved without the need for a formal objection.
Ball also said 21 objections from the 789 dealers that Chrysler intends to drop, should be addressed at a court hearing next week and not at this weeks hearings on the proposed sale to Fiat.
Show me the money
Behind the legal arguments lies the other issue: cash.
Breaking down the financial terms of the proposed deal, Kurtz turned to the $10 billion in unsecured claims owed to a UAW-administered trust to fund the health care of Chryslers unionized retirees. That trust fund will get a new promissory note from a reorganized Chrysler amounting to $4.6 billion, plus 68 percent of the stock in the reorganized automaker, although that is subject to dilution.
But if Fiats 20 percent stake in the new automaker is worth the $6.9 billion of value that Fiat says it is contributing, the UAWs 68 percent stake is worth about $24 billion -- more than twice what the trust fund is owed, Kurtz said.
This has been a key sore point with secured creditors such as the Indiana funds. They argue that under standard bankruptcy rules, they as secured creditors should be paid ahead of and certainly more than unsecured creditors such as the UAW. But thats not whats happening in the Chrysler bankruptcy, they say.
Ball didnt address the UAW trust fund directly in her opening written statement. But she said that more than 92 percent of first lien lenders have agreed to back Chryslers plan.
The Indiana funds, she said, hold just $42 million of Chryslers outstanding debt of $6.9 billion. She didnt spell out the math, but thats about 0.6 percent of the total.
And, she sniffed, those funds stake represents an economic investment of only $16 million, given the distressed state of this debt when it was purchased in August 2008.
In other words, the Indiana funds paid approximately 38 cents on the dollar for their Chrysler debt and now are whining because they think the UAW is getting more than they are and they might get a few pennies more if Chrysler were sold to some other buyer.
No way, said Ball and Chrysler Chairman Nardelli. There is no other buyer.
The objectors speculate that they personally may have fared better if Chrysler liquidated, Nardelli said in a written statement. To my knowledge, they have submitted no studies, analyses or tests to support this supposition.
We, on the other hand, have relied on experts, our knowledge of this industry and our intimate knowledge of our own company.
Faced with the choices presented and the information before me, he said, I am confident that approving the sale was an exercise of sound business judgment.