Chrysler Will Declare Bankruptcy, Say Administration Officials
By Brendan Moore
Obama Administration officials are telling reporters that Chrysler is going to file bankruptcy today.
President Obama has a press conference scheduled for 12 noon ET to address Chrysler’s travails.
Chrysler’s creditors and the US Treasury department officials just couldn’t come to an agreement to write down Chrysler’s debt. The holdouts (mostly hedge funds who deal in distressed debt) believe that they can get a return of approximately 65 cents on the dollar if Chrysler goes into bankruptcy liquidation. The federal government and the four major lenders who agree with the government offer have offered those holdout creditors a maximum of 33 cents on the dollar and a small equity position. The four major lenders that hold 70% of Chrysler’s debt are Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley – they decided some time ago that the government’s deal was the best they were going to get.
If Chrysler declares bankruptcy, there is little doubt that a tremendous battle over Chrysler’s assets will commence between the Treasury and Chrysler’s creditors.
Although the smart money might lean towards the government in this struggle, bankruptcy judges have a great deal of latitude in their decisions and probable outcomes sometimes get tossed out the window. There is no certainty to outcomes in complex bankruptcies like this one.
Twelve o’clock is only a half-hour away; we’ll get back to you this afternoon after some of the dust has settled.
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