TRF Statement: Chrysler Bankruptcy and ISTA

FOR IMMEDIATE RELEASE

Indiana State Teachers’ Retirement Fund Issues Statement Regarding Losses Stemming from the Chrysler Bankruptcy and Recent News about the Teachers’ Union Insurance Trust

INDIANAPOLIS, IN (May 20, 2009) -- Steve Russo, Executive Director of the Indiana State Teachers’ Retirement Fund (TRF), is announcing that TRF will join forces with State Treasurer Richard Mourdock to seek recovery of monies that would be lost should the Chrysler bankruptcy be approved in its current form. TRF would incur a $4.6M loss should the current bankruptcy plan be approved.

As explained in a separate press release from the State Treasurer’s office, the proposed bankruptcy settlement overturns nearly two hundred years of established law by redefining "secured creditors" to mean something less. In the past, to be "secured" meant that an investor was first in line to receive payment in the event of a bankruptcy; "non-secured" creditors would receive payments after secured creditors were paid. In the Chrysler bankruptcy, however, secured creditors are slated to receive $0.29 on the dollar while non-secured creditors receive higher values and end up with a 55% ownership of the newly restructured company.

Russo noted, “When TRF’s investment manager took the decision to make this investment, it was under the well established presumption that in the event of bankruptcy, TRF--along with the other secured creditors--would be first in line. With the unprecedented proposal before the bankruptcy court, TRF is being asked to move to the back of the line behind non-secured creditors. Moving to the back of the line means receiving less money than what we would have received in a ‘normal’ bankruptcy.

“TRF has a legal obligation to act in the best interest of TRF members. Agreeing to the current terms of the bankruptcy is not in the best interest of Indiana’s hardworking teachers. It would be irresponsible for TRF to ignore this loss of funds on behalf of its members. No matter how small or big the obstacle, TRF will use all legal means necessary to protect the best interest of our teachers’ retirement future.”

Executive Director Russo also explains that any change in investment policies to preclude future investments in secured corporate debt of businesses receiving infusions of federal funds or divestment from currently held investments of the like is up to the TRF Board of Trustees to consider. This topic will be on the agenda of the next TRF Board of Trustees meeting.

ISTA Insurance Trust
This week, there was significant media coverage surrounding the Indiana State Teachers’ Association (ISTA) insurance trust. The Indiana State Teachers’ Retirement Fund (TRF) wants to reassure its members that TRF and ISTA are completely separate and unrelated legal entities. TRF is a quasi-state agency that administers the Indiana State Teachers’ Retirement Fund on behalf of the State of Indiana. TRF is governed by a Board of Trustees appointed by the Governor. TRF is not impacted by the financial status or dealings of the ISTA.

Retirees and active teachers can rest assured that their pension benefit is still completely safe in the midst of these recent events.