Wednesday, April 29, 2009

Chrysler Creditor Talks Collapse, Bankruptcy Inevitable

. Wednesday, April 29, 2009

By stockOzone team

Talks between the U.S. Treasury Department and Chrysler LLC lenders aimed at cutting the automaker's debt and keeping it out of bankruptcy collapsed late on Wednesday, making bankruptcy almost certain.According to the sources, the talks broke down despite a revised offer from the Treasury of $2.25 billion to forgive $6.9 billion in Chrysler debt, up from its previous proposal of $2 billion.The embattled automaker is 80 percent controlled by private-equity firm Cerberus Capital Management LP.

Chrysler has until the end of the day on April 30 to slash its labor and debt costs, and consummate an alliance with Italian automaker Fiat SpA. Failure to do so means further emergency government aid for Chrysler will be withheld. According to the Wall Street Journal, a large number of the 45 banks and hedge funds voted against the deal, after they were given about 90 minutes to consider the proposal.J.P. Morgan Chase & Co. (NYSE: JPM) leads the creditor group.

At a White House news conference yesterday, President Barack Obama said that if Chrysler has to go through a bankruptcy it will be a quick process.

Disclosure: Author does not own any of the stocks discussed here.

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