The latest debt reduction offer by Chrysler lenders is unacceptable because it would yield the lenders an unjustified return, an Obama administration official has said.
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“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,” Reuters quoted the official as saying.
“Our hope and expectation is that these lenders take a more constructive position in the coming days that reflects the actual situation that they and the company face,” the anonymous official, not authorised to speak publicly on the issue, added.
Chrysler’s first-lien lenders have offered to take equity in a restructured automaker allied with Fiat SpA in exchange for writing off about 35% of the US$7bn they are owed, sources with knowledge of the ‘closed-door’ talks told Reuters.
Separately, Moody’s Investors Service on Tuesday cut Chrysler LLC’s debt rating to C, its lowest rating above default, citing the certainty of a bankruptcy or a debt restructuring it would view as a default.
Moody’s also lowered its estimate of recoveries in the event of a debt default by Chrysler to 20 percent from 50%, Reuters added.
Moody’s said in a statement that the cut in recovery prospects reflects unprecedented erosion in the North American auto markets and the impact that is having on Chrysler’s viability and the value of its assets and brands.
