April 11, 2009

S&P downgrades Chrysler, GM debt

Standard & Poor's says it has lowered its ratings for Chrysler LLC and General Motors debt, saying investors can expect less payback from the U.S. automakers.

S&P Friday said because of pressure being exerted on the automakers by the White House to reach deals, investors in Chrysler's $7 billion in first-lien loans, mostly held by major banks and institutions, can expect a payout of 30 cents to 50 cents on the dollar if the automaker files for bankruptcy, The Wall Street Journal reported.

That, it said, could be lower if Chrysler gets debtor-in possession financing since those lenders typically get paid back first. GM's debtholders, however, could get back 70 percent to 90 percent of their investments should that automaker go bankrupt, S&P said.

Bankruptcy filings by Chrysler and General Motors Corp. appeared to moving closer as GM faces an end-of-May deadline to negotiate deals with it stakeholders while Chrysler has until the end of this month, observers said.

S&P warned that Chrysler would be broken up and its parts sold in bankruptcy if it can't satisfy the U.S. government, which loaned it billions in taxpayer dollars, the Journal said.