We sent to you earlier this week an Alert on "Chrysler Bankruptcy Filing and Preliminary Impact on Suppliers." As we promised, below is an update based upon our review of the case and observations at the hearings.

Essential Supplier Motion

The Court approved treatment of essential suppliers on a temporary basis. Here is a summary of the Interim Order:

Chrysler's bankruptcy filing, which occurred on April 30, has generated considerable activity already. Baker Hostetler has been monitoring closely the Chrysler activity for our supplier clients. We attended the hearing on the first day filings, which were generally ministerial in nature. The court approved joint administration, maintenance of cash management/business forms, enforcement of automatic stay, payment of wages, and honoring of all warranties.

In a recent decision, the Bankruptcy Court for the District of Delaware allowed the collateral agent for senior lenders to credit bid for the debtors’ assets even though all of the senior lenders had not authorized the bid. One of the senior lenders had objected to the group’s acquisition of the debtors’ assets by the credit bid. In re GWLS Holdings, Inc., 2009 WL 453110 (Bankr. D. Del. Feb. 23, 2009) (Walsh, J.).

The U.S. Court of Appeals for the Fifth Circuit held on March 25, 2009, that a bankruptcy court had improperly surcharged property in the hands of a credit bidding asset buyer with the expenses of the judicial sale. In re Skuna River Lumber, LLC, __F.3d ___, 2009 U.S. App. LEXIS 6175 (5th Cir. 3/25/09). Explaining that the “bankruptcy court had no jurisdiction to take such action,” the Fifth Circuit also vacated the district court’s improper ruling that the bankruptcy judge could enter a personal judgment against the asset buyer. Id., at *9.  

Facts