Chrysler debtholders counteroffer on debt restructuring

A group of banks and funds that hold billions in loans to Chrysler LLC has made a counteroffer in the negotiations aimed at restructuring the automaker’s debt to help the company survive. Automotive News reports:

Chrysler LLC’s lenders have offered to take equity in a restructured automaker allied with Fiat SpA in exchange for writing off about 35 percent of the $7 billion they are owed, according to people with knowledge of the closed-door talks.

Under the terms of the counter-offer conveyed to the U.S. Treasury on Monday, the lenders would retain about $4.5 billion in debt and take a stake of more than a third of a new Chrysler supported by new U.S. government investment and a ground-breaking deal with Fiat.

That would mark a much richer payout than U.S. officials first offered the banks that helped finance Chrysler’s 2007 sale to private equity firm Cerberus Capital Management LP.

The Treasury Department and Chrysler have been asking those banks to take a much higher portion of the value of those loans in stock rather than cash payments, wanting to write down $6 billion in debt down to about $1 billion and swap the rest for stock in a restructured Chrysler/Fiat company.

The company has only 9 days to reach deals with all its major debtholders to reduce their debt load and to finalize an arrangement with Italian automaker Fiat to combine operations.

Rep. Gary Peters told Reuters that this new counteroffer was “an affront to taxpayers” and said, “This is not a serious counter-offer. These debt holders were offered fair market value for the debt, and the banks have responded by asking for a windfall.”