Tucson CitizenTucson Citizen

AP sources: New offer made to Chrysler lenders

NEW YORK – The Treasury Department has made a new offer to Chrysler LLC’s lenders, asking banks and hedge funds that hold $6.9 billion in debt to forgive $5.4 billion and take a 5 percent stake in a Chrysler-Fiat alliance, according to two people familiar with the matter.

The offer was made to the group late Tuesday, these people said. The people asked not to be named because the negotiations are private.

The Treasury Department’s proposal is in response to the lenders’ offer earlier this week to forgive $4.5 billion in Chrysler debt in exchange for a 40-percent stake in the alliance. A Chrysler spokeswoman declined to comment.

The Treasury is negotiating with lenders as Chrysler races to meet a government-imposed April 30 deadline to swap debt for equity, cut labor costs and negotiate an alliance with Italy’s Fiat Group SpA.

The Auburn Hills, Mich., automaker is living on $4 billion in federal loans and could get another $500 million in working capital to survive through April. But without massive restructuring and a deal with Fiat, Chrysler won’t get any more aid, government officials have said.

The Obama administration is offering an additional $6 billion to Chrysler if it meets the April 30 deadline. If it fails, government aid will end and Chrysler likely faces liquidation.

The equity stake would go to first-lien lenders including Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and several smaller banks, plus some hedge funds. Chrysler has about 45 such lenders who would be first in line to get money if the company’s assets were liquidated.

Including the secured debt and government loans, Chrysler owes about $23.5 billion, including $10.6 billion to a United Auto Workers trust fund that will take over retiree health care costs starting next year. It also owes $1 billion each to its owners, Cerberus Capital Management LP and Daimler AG.

The company is negotiating with the UAW to take equity for part of the trust fund obligation, as well as other concessions. But bankruptcy experts have said secured debtholders won’t likely settle for pennies on the dollar because their loans are secured by Chrysler’s physical assets, and because they likely purchased credit default insurance that would repay them if Chrysler defaults.

Citizen Online Archive, 2006-2009

This archive contains all the stories that appeared on the Tucson Citizen's website from mid-2006 to June 1, 2009.

In 2010, a power surge fried a server that contained all of videos linked to dozens of stories in this archive. Also, a server that contained all of the databases for dozens of stories was accidentally erased, so all of those links are broken as well. However, all of the text and photos that accompanied some stories have been preserved.

For all of the stories that were archived by the Tucson Citizen newspaper's library in a digital archive between 1993 and 2009, go to Morgue Part 2

Search site | Terms of service