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Chrysler creditors offer to swap debt for equity

Chrysler creditors offer to swap debt for equity

James Martinez April 22nd, 2009 James Martinez By James Martinez Author April 22nd, 2009
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December 31st, 1969 Chrysler's race to turn its debts into equity took a major turn for the better today, with an offer from a group of banks and hedge funds that hold almost $7 billion in debt. The group is proposing to exchange around $2.5 billion of Chrysler's debt, but only in exchange for close to 40% of the company. There is also a stipulation that Fiat must invest at least $1 billion in cash in Chrysler, as well as one seat given to the group on the company's board. The offer from the banks is a far cry from what the Treasury Department requested just last week, which was a debt reduction of around $6 billion. The race to beat the April 30th deadline, which is now almost upon Chrysler, has seen the company attempting to swap its debt for equity, cutting costs massively and attempting to form an alliance with Fiat. Nevertheless, should any of these goals fail then government aid will end and Chrysler will be left to stand - or rather, fall - on its own. While the banks understandably don't want to forgive all of Chrysler's debt, some government officials such as Congressman Gary Peters, D-Mich., are viewing the banks' offer as that of one seeking a windfall. Speaking with the Associated Press, Peters claimed that the "debtholders were offered fair market value for their debt" but then "responded by asking for a windfall". He further criticized the banks, which include the likes of JPMorgan Chase, Citigroup, and Goldman Sachs for taking billions of dollars of taxpayer money through the Wall Street bailout but then remaining unwilling to "work with President Obama" to support the auto industry.
One of the directors will be Fiat CEO Sergio Marchionne who will be in charge of the day-to-day running of the carmaker

One of the directors will be Fiat CEO Sergio Marchionne who will be in charge of the day-to-day running of the carmaker

Enlarge Photo

Chrysler's race to turn its debts into equity took a major turn for the better today, with an offer from a group of banks and hedge funds that hold almost $7 billion in debt. The group is proposing to exchange around $2.5 billion of Chrysler's debt, but only in exchange for close to 40% of the company.

There is also a stipulation that Fiat must invest at least $1 billion in cash in Chrysler, as well as one seat given to the group on the company's board. The offer from the banks is a far cry from what the Treasury Department requested just last week, which was a debt reduction of around $6 billion.

The race to beat the April 30th deadline, which is now almost upon Chrysler, has seen the company attempting to swap its debt for equity, cutting costs massively and attempting to form an alliance with Fiat. Nevertheless, should any of these goals fail then government aid will end and Chrysler will be left to stand - or rather, fall - on its own.

While the banks understandably don't want to forgive all of Chrysler's debt, some government officials such as Congressman Gary Peters, D-Mich., are viewing the banks' offer as that of one seeking a windfall.

Speaking with the Associated Press, Peters claimed that the "debtholders were offered fair market value for their debt" but then "responded by asking for a windfall". He further criticized the banks, which include the likes of JPMorgan Chase, Citigroup, and Goldman Sachs for taking billions of dollars of taxpayer money through the Wall Street bailout but then remaining unwilling to "work with President Obama" to support the auto industry.

Tags: Nardelli, Industry, Renault, hybrids, ENVI, Sergio Marchionne, Partnership

Posted in: Toyota, Chrysler, Fiat, Nissan, News, Electric Cars, Hybrid, EV


Comments (2 total)

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  1. ma_Vinzer avatar by Vinzer #1, Posted: 4/22/2009

    The brink of collapse of one of or nation's most important auto manufacturer's has produced a giant game of chicken in which the government, bondholders, stockholders, the unions, and creditors and lenders all want the most bang for their buck before anyone else. Rather than working together, rather than COOPERATING to FIX THE PROBLEM, each group is out to get the most money it can out of an ailing company.

    The stockholders are screwed no matter what, but when bondholders and creditors are offered a PERFECTLY ACCEPTABLE debt for equity swap, and no one takes it, it only perpetuates the problem and increases the likelihood that everything goes down in FLAMES.

    Rather than trying to **** over the next guy, bondholders and creditors/lenders should just TAKE WHAT THEY'RE OFFERED. Here's a message for these guys, CHRYSLER IS ABOUT TO GO BANKRUPT.

  2. ma_54chevyman avatar by 54chevyman #2, Posted: 4/22/2009

    Why can't Obama sit down with the parties at be and negotiate a settlement. It is critical to America's future. Then the taxpayer can come out on top when Chrysler / Fiat bounce back along with GM. There is going to be a huge buy America sentiment after the embattled US car companies emerge! I can feel it! Obama take charge and don't let GM give away Opel!

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