It seems Chrysler may be able to avoid filing bankruptcy as was suspected earlier in the week, according to BusinessWeek.com. You can find a snippet of their post below, but the full story can be found here.
Chrysler LLC and the U.S. Treasury Dept. have reached an agreement with banks and private equity firms holding $6.9 billion of the automaker’s debt. Those firms have agreed to take $2 billion and a small equity stake in the company, paving the way, it seems, for Chrysler to avoid bankruptcy and with Italian automaker Fiat.
The deal, first reported by Washingtonpost.com, was confirmed by a Treasury official who said: “The agreement from Chrysler’s principal banks is an exceptional accomplishment in line with the President’s firm commitment that all stakeholders sacrifice to make this deal succeed.”
Details of the deal may come officially from Chrysler or Treasury officials later today.
Banks, including J.P Morgan, Citi, Morgan Stanley and Goldman Sachs, had been holding up the deal for weeks, insisting on more cash and equity. But a deal struck with the United Auto Workers Sunday night, said one executive familiar with the negotiations, put additional pressure on the debt holders to strike a deal.
Those banks are holding secured debt. And one of the issues confronting them is that Chrysler’s assets—Jeep, minivans, factories, Dodge Ram pickup and real estate—all have limited value in the recession, and few potential buyers [see Chrysler’s Looming Tag Sale].
The possibility of a Chapter 11 filing is not completely off the table for Chrysler. But it is far less likely.
Chrysler was to have filed a new restructuring plan to the White House auto industry task force by April 30, so that the Obama Administration could determine if Chrysler has restructured its business extensively enough to merit an additional $6 billion in loans on top of $4.5 billion it has already received.
A deal with Fiat is now expected to go forward, with the Italian automaker owning 35% of Chrysler, while the United Auto Workers will own up to 55%, and the Federal government up to 10%.
