February 23, 2009

U.S. seeking bankruptcy loan for carmakers

The U.S. Treasury has turned to outside advisers to begin assembling the largest bankruptcy loan ever in case a U.S. automaker goes under, sources said.

The advisers are talking to banks about a loan of $40 billion to see either Chrysler LLC or General Motors Corp. through while they renegotiate their debts if they declare bankruptcy, The Wall Street Journal reported Monday.

The Obama administration is preparing for the possibility of bankruptcy but trying to avoid looking as if that was the option they preferred, the newspaper said.

Everything is on the table right now, one source close to the discussions told the Journal. Lining up funds for the massive loan is a matter or due diligence.

Banks have been reluctant to participate, fearing they won't get their money returned. Early discussions include private financing known as a debtor-in-possession loan that would be guaranteed by the government, the Journal said.