BLBG: Treasury Said to Ask Chrysler Banks to Cut Debt to $1.5 Billion
The U.S. Treasury asked Chrysler LLC’s secured lenders to reduce their debt to $1.5 billion from $6.9 billion in exchange for a 5 percent equity stake in the automaker, a person familiar with the negotiations said.
The offer followed by a day a proposal by the lenders to reduce the debt to about $4.5 billion and take 40 percent equity. The person describing the Treasury offer asked not to be identified discussing the private talks.
Treasury and the lenders, made up of four banks and about 45 investment funds, are still far apart as a government deadline of April 30 approaches for Chrysler to cut most of its secured debt, reach cost-saving labor accords and forge an alliance with Fiat SpA. The government has been negotiating with the lenders on Chrysler’s behalf.
The proposal from the lenders also asked Fiat to make a cash contribution to its proposed Chrysler alliance, said people familiar with their offer.
Treasury submitted an initial offer to the lenders early this month to reduce their loan obligations to about $1 billion. The lenders rejected that request and crafted a counter-offer using new business assumptions for Chrysler based on a partnership with Fiat, the people said.
Treasury spokeswoman Jenni Engebretsen declined to comment. The Wall Street Journal reported the offer earlier.
Lender Group
The lender group is composed of New York-based JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc., Morgan Stanley and the investment funds.
The lenders’ steering committee includes the four banks as well as Elliott Management Corp., Stairway Capital, Perella Weinberg Partners and Oppenheimer Funds.
“We fully support a solution that saves jobs and protects the industry’s viability,” the lenders said in a statement yesterday. “We believe this solution can be achieved while recognizing our legal status as first lien senior secured lenders and the duties we have to our shareholders and investors, which include pension funds, endowments, retail brokerage account holders, and other investors.”
The U.S. automaker is 80 percent-owned by the New York- based investment firm Cerberus Capital Management LP.
