A small group of Chrysler's lenders who have objected to the Obama administration's plan for a quick dash through bankruptcy must identify themselves, in spite of death threats, a U.S. judge ruled on Tuesday.

Judge Arthur Gonzalez, who is overseeing Chrysler's bankruptcy case in Manhattan, said that the lenders must disclose their identities on Wednesday morning, leaving open the possibility that some may change their minds.

These lenders do not have grounds for (their identity) statement to be sealed, Gonzalez said at the court hearing, saying threats on the Internet did not meet the bar for such a request and that concerns about reputational harm were not subject to protection by the court.

In court papers filed earlier on Tuesday, the group of lenders said they were being blamed unfairly for Chrysler's failure amid a political backlash. Tom Lauria, the lawyer representing the lenders, said that a public disclosure of the identities of the funds would force several of these lenders to surrender their legal rights and agree to the government's illegal plan.

The group, which calls itself the company's non-TARP lenders, says its members have taken no bailout money from the government and that the four large banks that agreed to the Chrysler bankruptcy plan do not represent their interests because of their participation in the government support program.

Chrysler's first-lien lenders were owed a collective $6.9 billion stemming from the automaker's breakaway from Daimler AG in 2007. About 70 percent of the debt was held by the four large banks, all of which received support under the U.S. government Troubled Asset Relief Program.

The dissident lender group holds about $330 million of secured Chrysler debt. Some other non-TARP lenders, and even former members of the group, have agreed to the government's plan.

Another group of the company's creditors on Tuesday also set the stage to begin playing a larger role in the case. An eleven-member committee of Chrysler's unsecured creditors' hired law firm Kramer Levin Naftalis & Frankel LLP to represent it in the case.

OBJECTIONS TO SALE

Chrysler, which filed for bankruptcy in New York on April 30, has asked for permission for a quick sale of most of its assets to a new company held by Italy's Fiat SpA , a United Auto Workers union-aligned healthcare trust and the U.S. and Canadian governments.

Chrysler was in court on Tuesday afternoon, asking Judge Gonzalez to approve its proposed sale procedures, so the company may move forward with its plan.

However, the dissident lender group has also asked the court to block Chrysler's efforts to sell itself, or modify its bidding process to make it more competitive. It said the current sale procedures preclude anyone but the government from being able to bid on Chrysler's assets.

Lawyers representing the group also said in court papers on Tuesday that the plan would subvert time-honored bankruptcy principles and prevent the automaker's creditors from getting a fair return.

The lender group said in documents filed with the bankruptcy court that the procedures were designed to prevent, not encourage, competitive bidding, and called the accelerated timetable an absurdity.

Chrysler executive Scott Garberding said in court on Tuesday that Chrysler had explored tie-up deals with Nissan <7201.T> and General Motors prior to the current proposed deal with Fiat, but they fell apart as the U.S. economy worsened.

Chrysler had concluded in its negotiations with Fiat that Fiat had opportunities for its cars at Chrysler dealerships in the United States and that Chrysler could benefit from Fiat's Latin American dealer network, Garberding said.

In the U.S. it gives Chrysler access to small, power trains, it gives Chrysler access to a couple of small vehicle platforms that would otherwise be very expensive to develop, said Garberding, who is chief procurement officer at Chrysler.

Chrysler has asked for a required hearing into the proposed sale as soon as May 21.

The case is In re: Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002.

(Reporting by Emily Chasan, Walden Siew, Chelsea Emery and David Bailey, editing by Matthew Lewis and Steve Orlofsky)

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