LOS ANGELES (AP) -- The Treasury Department lobbed back a new offer to Chrysler LLC's lenders, proposing that banks and hedge funds which hold $6.9 billion in debt forgive $5.4 billion in exchange for a 5 percent stake in a Chrysler-Fiat alliance, media reports said late Wednesday.
The new offer represents payment of 22 percent of the debt lenders are owed, according to a report by The Wall Street Journal. That would be up from a previously rejected government offer of 15 percent payment and no stock.
However, the new proposal is still far less than the 40 percent stake and $4.5 billion payment -- representing 65 percent of what they are owed -- sought by the automaker's lenders.
Chrysler is living on $4 billion in federal loans and could get another $500 million to survive through April, but without massive restructuring and a Fiat deal, Chrysler won't get any more aid, government officials have said.
So the government is now deciding on how and to who Chrysler will be sold... is this the reason why? ( from the last two paragraphs)
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.
