In an order dated May 7, 2009, Judge Arthur Gonzales approved Chrysler’s proposed bidding procedures for the sale of substantially all of the Company’s assets to a newly formed entity that would continue business under Chrysler’s name. The court stated that Chrysler “articulated good and sufficient reasons” for relief requested in its motion relating to the Master Transaction Agreement between the company and Italian automaker Fiat S.p.A.
Some lenders had opposed the order, expressing concerns that the process deviates from normal bankruptcy sale processes and constitutes a de facto reorganization plan. Judge Gonzalez, however, noting the “urgent need” for sale, called the process “appropriate and necessary.”
Under the bidding procedures, Chrysler will coordinate the efforts of bidders in conducting due diligence and receive and evaluate the bids. Participation requirements for bidders include the execution of a confidentiality agreement and a statement by the bidder indicating their bona fide interest in Chrysler’s assets. Both documents must be submitted no later than 4:00 pm on May 15, 2009.
Upon Chrysler’s satisfaction with the documents, the company will deliver a confidential memorandum containing information and financial data with respect to the assets, as well as a copy of the Master Transaction Agreement, and grant the bidder access to an electronic data room concerning the assets. Chrysler must also accommodate all reasonable requests for additional information from any approved bidder.
All bids must be submitted by 5:00 pm on May 20, 2009 (a date that is five days later than the May 15 deadline Chrysler originally proposed). In order for a bid to be considered, it must meet the following requirements:
- There must be an offer to purchase a substantial portion of the assets under the terms of the Master Transaction Agreement;
- The bid must not be conditioned on any further due diligence, bid protections or financial contingencies;
- The bidder must agree to the assignment of the bargaining agreements between UAW and Chrysler;
- The purchase price must be a minimum of $2.1 billion;
- The bidder must assume Chrysler’s obligations under the GMAC MAFA Term Sheet, attached to the Master Transaction Agreement;
- The bid must be received by the May 20, 2009 deadline;
- The bid must not entitle the bidder to any breakup fee;
- The bid must include a list of all executory contracts or unexpired leases to be assumed or assigned;
- The bid must be accompanied by written evidence of available funding;
- The bid must contain a copy of a board resolution or other document demonstrating the bidders authority to make such a bid;
- The bid must include “any pertinent factual information” to assist Chrysler in their analysis of the bid; and
- A “good faith deposit” equal to 10% of the total purchase price must accompany the bid.
After bids are received, Chrysler will select a “lead bid” and a “secondary bid.” Throughout the selection process, the company is authorized to conduct further negotiation with the bidders. The selection must be made and presented to the court no later than 12:00 pm on May 26, 2009. Other bidders will then be granted an opportunity to “top” the lead bid. If any bidder chooses to do so, an auction will be conducted. The successful bidder will then be presented to the court for the sale hearing.
The court will conduct the sale hearing on May 27, 2009 at 10:00 a.m. to consider approval of the sale transaction to the successful bidder. (The May 27 date is six days later than the May 20 sale hearing date Chrysler originally proposed.) At that hearing, the court will also consider approval of the UAW Retiree Settlement Agreement, as discussed in a message from the UAW to Chrysler retirees.
The Master Transaction Agreement provides that Fiat will receive a $35 million breakup fee in the event that another purchaser is the successful bidder. The court deemed the fee “actual and necessary in light of the size and nature” of the transaction. Update (May 9, 2009): It has been widely reported that two of the largest of so-called Non-TARP Lenders that had opposed Chrysler's sale motion, Oppenheimer Funds and Stairway Capital, have indicated that they will no longer oppose the expedited sale, which appears to have caused the remaining Non-TARP Lenders to withdraw their opposition.