Chrysler lenders’ counter-offer

The current Chrysler first-lien lenders group’s offer for to the Treasury is dropping the debt level to $3.75 billion, and 40% of Chrysler’s equity. The lenders have dropped $750 million in debt, their demand for $1 billion of their equity to be preferred equity, and their demand that Fiat invest $1 billion. This is still $2.25 billion and 35%-of-Chrysler more than the Treasury’s current offer to the lenders.

The negotiations are likely to increase in speed as deadlines loom and Chrysler and the governments wield bankruptcy as a threat against lenders and unions alike.  

According to Reuters, the government’s first offer to Chrysler’s first-lien lenders was around $1 billion cash, in exchange for $7 billion in debt. The lenders countered with an offer of reducing the debt to $4.5 billon in exchange for 40% of the equity, prompting “leaks” that suggested Chrysler was planning to enter bankruptcy within one week and a Treasury counter-offer of $1.5 billion in debt and 5% of the equity in Chrysler, in exchange for the $7 billion in debt. 

The lenders involved include JPMorgan Chase & Co, Morgan Stanley, Citigroup, Goldman Sachs Group, Oppenheimer Funds, Stairway Capital Management, Elliott Management, and Perella Weinberg Partners. This group is currently negotiating with the Treasury and Chrysler, with motivation for bargaining coming from the threat of a Chapter 11 bankruptcy.  

Similar talks are being held with the United Auto Workers and Canadian Auto Workers, with similar leverage held by Chrysler and the two national governments.