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Banking on Chrysler

Posted: April 6th, 2009 | Author: | Filed under: Auto News | Tags: , | Comments Off on Banking on Chrysler

Banks (JPMorgan Chase & Co, Citigroup, Goldman Sachs Group Inc and Morgan Stanley) that have loaned Chrysler LLC $US6.8 billion are resisting government pressure to swap more than $US5 billion of that debt for stock. The banks’ reluctance is slowing Chrysler’s attempt to cement an alliance with Fiat SpA of Italy by May 1 as well as its attempt to renegotiate a health-care accord with the United Auto Workers union, the newspaper reported on its Web site, citing people familiar with the matter.

The lenders are open to working out a deal on debt restructuring and those discussions are moving forward quickly. Sources said the US Government had suggested a reduction in Chrysler’s debt of as much as $US6 billion. As holders of secured debt, they have the right to take control of Chrysler brands, plants and other assets pledged as collateral if the company files for bankruptcy protection.

On Wednesday, the US Treasury gave Chrysler 30 days to broker concessions to improve its financial position with its debt holders, Fiat or its debt holders or face bankruptcy. All four banks declined comment, as did Cerberus Capital Management which controls 80.1 per cent of Chrysler.