Breakingviews | Chrysler

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29 Apr 2009 20:26

Chrysler Dodge

Context News

The Treasury Department has told Chrysler’s secured lenders that they need to accept $2bn in exchange for their $6.9bn loan by Thursday. JPMorgan, Citigroup, Goldman Sachs, and Morgan Stanley, the four largest banks holding 70% of the debt, have agreed to the deal.

The United Auto Workers union’s retiree health-care fund will own 55% of Chrysler in exchange for cutting in half the automaker’s $10.6bn cash obligation to the group, according to Bloomberg. The US Treasury will also give up to 35% of equity to Fiat and the Treasury will keep 10%.

With banks holding 70% of Chrysler’s secured debt agreeing to the Treasury’s 30 cents on the dollar offer, the reorganisation can move ahead. Of course, with the other 40 lenders still willing to fight, it means Chrysler is hard-pressed to avoid bankruptcy.

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