Feds shoot down creditor proposal; push for deal

The Treasury department has rejected a proposal from Chrysler’s creditors. The group of large banks and some private equity firms, offered to convert $6.9 billion in secured debt to a $4.5 billion first lien secured loan, plus $1 billion in preferred equity in the company and a 40 percent common equity stake. The group also demanded a seat on the board and that Fiat invest $1 billion cash into the deal.

A Treasury Department statement in response to the offer said, “It is neither in the interest of Chrysler’s senior lenders nor the country for them to advance a proposal that would yield them an unjustified return as Chrysler, its employees and other stakeholders are working tirelessly to help this company restructure.”

With time running short, the Obama Administration is putting the screws to every party involved to reach an agreement. Meetings have been held with management at Chrysler, Fiat and Daimler AG, as well as the creditors’ committee and the United Auto Workers union.

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