S&P lowers Chrysler ratings

Standard & Poor’s lowered its ratings on Chrysler’s senior secured loans due in 2013 and 2014 two grades, from CCC to CC, citing the likelihood of default and lower potential recoveries by holders of Chrysler debt.

The New York-based ratings firm estimates those holding Chrysler debt might recover just 30 to 50 cents on the dollar if the company does default on its payments. S&P also cut the automaker’s senior secured second-lien term loans due in 2014 from CC to C, indicated holders of these notes may recover just ten percent of the face value. In the event of a bankruptcy filing, S&P believes Chrysler would be forced into liquidation rather than being able to reorganize.

S&P Recovery Analyst Greg Maddox said, “The lowering of our issue ratings reflects lower recovery estimates, given our current view that Chrysler would be unlikely to emerge from bankruptcy as one reorganized entity.”