Indiana Makes Final Attempt to Block Chrysler Sale

State treasurer argues that deal tramples on bankruptcy law, Constitution
By Rob Quinn,  Newser Staff
Posted Jun 5, 2009 5:49 AM CDT
A federal bankruptcy judge approved the sale of most of Chrysler's assets to Italy's Fiat last week, but the deal is on hold while debt holders appeal.   (AP Photo/Luca Bruno, file)
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(Newser) – Indiana's attempt to block Chrysler's sale to Fiat moves to a federal appeals court today, the Washington Post reports. The state's treasurer, who oversees three state pension and construction funds that hold $42 million of Chrysler's debt, is arguing that the deal to bring the company out of bankruptcy violates bankruptcy law by favoring junior, unsecured creditors over senior ones.

Indiana argues that the sale is an "attack on the most fundamental of creditor rights," and has been unconstitutionally orchestrated by the Treasury. Chrysler's lawyers have criticized Indiana's "cockeyed way" of looking at the sale, and warned that its continued legal action is threatening to derail the merger. The case is being closely watched by General Motors, which is likely to face similar challenges from debtholders.