Chrysler clears yet another hurdle to avoid bankruptcy.
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Chrysler clears yet another hurdle to avoid bankruptcy.
First I gave Chrysler a 50/50 chance because I believed the CAW had the potential to derail it.
Once that passed, I gave it a 65/35 chance. I felt Chrysler's debtholders might simply decide they could get a better return on their money by parting Chrysler out during bankruptcy if the offer on their debt goes too low.
Now it seems they've reached an agreement.
I'll raise Chrysler's survival chances to 70-75% now, dependent on the holdouts giving up and getting on board by Thursday.
Once that happens, we can chalk up yet another of Chrysler's death-defying, downright improbable, and not the least very frigging impressive ability to escape from the jaws of certain death multiple times over the years.
Even if Chrysler winds up in bankruptcy regardless, through all the existing deals and agreements they've managed to make, this could end up being one amazingly short bankruptcy.
Chrysler would almost literally be back in business the following day.
Once that passed, I gave it a 65/35 chance. I felt Chrysler's debtholders might simply decide they could get a better return on their money by parting Chrysler out during bankruptcy if the offer on their debt goes too low.
Now it seems they've reached an agreement.
I'll raise Chrysler's survival chances to 70-75% now, dependent on the holdouts giving up and getting on board by Thursday.
Once that happens, we can chalk up yet another of Chrysler's death-defying, downright improbable, and not the least very frigging impressive ability to escape from the jaws of certain death multiple times over the years.
Even if Chrysler winds up in bankruptcy regardless, through all the existing deals and agreements they've managed to make, this could end up being one amazingly short bankruptcy.
Chrysler would almost literally be back in business the following day.
Chrysler creditors agree to deal to help avert bankruptcy
David Shepardson / Detroit News Washington Bureau
Washington -- The Treasury Department has reached a deal with Chrysler's major creditors -- a move that is essential for Chrysler to avoid bankruptcy.
Still, the deal to accept $2 billion in cash for $6.9 billion in secured debt may not be enough to avert a Chrysler bankruptcy filing that could come as early as Friday.
The Obama administration hasn't ruled out bankruptcy even if all of Chrysler's banks agree to the deal. The administration gave the Auburn Hills-based automaker a Thursday deadline to come up with a workable business plan that would convince the government to give it more financial aid.
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Chrysler could need to discharge some of its liabilities in bankruptcy, and the administration has said a bankruptcy stay of up to 30 days could be the "best option."
"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," an administration official said.
The group of 46 lenders led by J.P. Morgan, Citibank, Goldman Sachs and Morgan Stanley hold $6.9 billion in secured debt. They have been in talks for weeks to write down the debt.
The four principal banks, which hold about 70 percent of Chrysler's secured debt, have agreed to the deal, people familiar with the matter said. The lenders will not get any equity stake.
"Without having all 46 banks, it would still be necessary for Chrysler to go through what we call our surgical bankruptcy -- 30-day type of process -- in order to in effect drag along any banks that choose not to participate," a person familiar with the matter said.
The creditors had sought $3.5 billon in new debt and a 40 percent equity stake in Chrysler after initially seeking $4.5 billion, a $1 billion preferred equity stake and a 40 percent equity stake.
Rep. Gary Peters, D-Bloomfield Township, called the banks' announcement "a very positive development."
"The remaining debt holders should understand that this deal is better than what they could expect in bankruptcy, and I encourage them to accept this fair offer," Peters said. "I am hopeful this leads to an agreement to finalize an alliance with Fiat so that Chrysler can avoid bankruptcy and continue to support hundreds of thousands of American jobs."
Chrysler is still working to reach a tie-up with Italian automaker Fiat SpA before a Thursday government deadline. No signed agreement has been reached.
The Obama administration is "encouraged" by the Chrysler-Fiat "business model," a person familiar with matter said.
The Obama auto task force has held talks with GMAC about potentially assuming some Chrysler auto loans. A person familiar with the matter said it was unlikely that Chrysler Financial and GMAC -- both controlled by Cerberus Capital Management LP -- would merge in the short-term, if at all.
GMAC is one of 19 banks undergoing a Treasury Department "stress test."
Fiat was unable to comment immediately. The automaker has said from the outset that it was prepared to provide small-car and engine technology valued at $8 billion to $10 billion to the partnership, but a tie-up was predicated on agreements by Chrysler's stakeholders.
The Obama administration has agreed to loan Chrysler up to $6 billion more if it completes a successful alliance with Fiat and reaches agreements with its unions and creditors.
Talks with GM and the UAW over concessions are set to begin soon. The UAW reached a deal late Sunday with Chrysler on concessions, and ratification is expected by late Wednesday.
David Shepardson / Detroit News Washington Bureau
Washington -- The Treasury Department has reached a deal with Chrysler's major creditors -- a move that is essential for Chrysler to avoid bankruptcy.
Still, the deal to accept $2 billion in cash for $6.9 billion in secured debt may not be enough to avert a Chrysler bankruptcy filing that could come as early as Friday.
The Obama administration hasn't ruled out bankruptcy even if all of Chrysler's banks agree to the deal. The administration gave the Auburn Hills-based automaker a Thursday deadline to come up with a workable business plan that would convince the government to give it more financial aid.
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Chrysler could need to discharge some of its liabilities in bankruptcy, and the administration has said a bankruptcy stay of up to 30 days could be the "best option."
"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," an administration official said.
The group of 46 lenders led by J.P. Morgan, Citibank, Goldman Sachs and Morgan Stanley hold $6.9 billion in secured debt. They have been in talks for weeks to write down the debt.
The four principal banks, which hold about 70 percent of Chrysler's secured debt, have agreed to the deal, people familiar with the matter said. The lenders will not get any equity stake.
"Without having all 46 banks, it would still be necessary for Chrysler to go through what we call our surgical bankruptcy -- 30-day type of process -- in order to in effect drag along any banks that choose not to participate," a person familiar with the matter said.
The creditors had sought $3.5 billon in new debt and a 40 percent equity stake in Chrysler after initially seeking $4.5 billion, a $1 billion preferred equity stake and a 40 percent equity stake.
Rep. Gary Peters, D-Bloomfield Township, called the banks' announcement "a very positive development."
"The remaining debt holders should understand that this deal is better than what they could expect in bankruptcy, and I encourage them to accept this fair offer," Peters said. "I am hopeful this leads to an agreement to finalize an alliance with Fiat so that Chrysler can avoid bankruptcy and continue to support hundreds of thousands of American jobs."
Chrysler is still working to reach a tie-up with Italian automaker Fiat SpA before a Thursday government deadline. No signed agreement has been reached.
The Obama administration is "encouraged" by the Chrysler-Fiat "business model," a person familiar with matter said.
The Obama auto task force has held talks with GMAC about potentially assuming some Chrysler auto loans. A person familiar with the matter said it was unlikely that Chrysler Financial and GMAC -- both controlled by Cerberus Capital Management LP -- would merge in the short-term, if at all.
GMAC is one of 19 banks undergoing a Treasury Department "stress test."
Fiat was unable to comment immediately. The automaker has said from the outset that it was prepared to provide small-car and engine technology valued at $8 billion to $10 billion to the partnership, but a tie-up was predicated on agreements by Chrysler's stakeholders.
The Obama administration has agreed to loan Chrysler up to $6 billion more if it completes a successful alliance with Fiat and reaches agreements with its unions and creditors.
Talks with GM and the UAW over concessions are set to begin soon. The UAW reached a deal late Sunday with Chrysler on concessions, and ratification is expected by late Wednesday.
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