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.