Currently reading: Chrysler restructuring threatened
Trio of debtors begin legal challenge - more may follow

The reorganisation of Chrysler faces another setback, as three of the company's secured creditors have confirmed they are mounting a legal challenge to its Chapter 11 bankruptcy protection filing.

The trio – all Indiana state pension funds – claim that the Chapter 11 filing violates their legal rights and the US government’s authority.

Chrysler's creditors were offered around 30 cents per dollar of debt to settle claims of $6.9 billion. Some creditors refused to accept this deal, forcing the Chapter 11 filing.

Now the three pension funds say they stand to lose $4.6 million if the pay-off deal is forced on them by the bankruptcy court.

Chrysler's debtors had previously held off mounting a legal challenge to the bankruptcy protection filing, following a scathing attack on them by US president Barack Obama. There are fears the legal action could lead to other debtors taking legal action, further delaying the restructuring process.

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