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Chrysler, in corner, may choose bankruptcy

April 29, 2009

Analysts and White House officials remained uncertain if a month of intense negotiations would keep the third largest U.S. automaker out of bankruptcy court.

On Tuesday, White House spokesman Robert Gibbs would not rule out the option of Chrysler filing for bankruptcy protection.

I wouldn’t rule anything out, Gibbs said, The Detroit News reported.

Gibbs noted, there’s still some ways to go in these negotiations.

JPMorgan Chase, Citibank, Goldman Sachs and Morgan Stanley, which hold 70 percent of Chrysler’s $6.9 billion in secured debt have agreed to a debt for equity swap that reduces the debt to $2 billion and includes 10 percent of a restructured Chrysler. Smaller creditors, however, are resisting the arrangement, the News reported.

Without having all 46 banks, it would be necessary for Chrysler to go through what we call our surgical bankruptcy — 30-day type of process, a source close to the discussions said.

Rebecca Lindland, an auto analyst with IHS Global Insight, said a so-called surgical bankruptcy could give rise to complications.

It’s a little naive to think bankruptcy is predictable, she said.

Fiat Vice Chairman John Elkann said the Italian auto company, which may take over a portion of a restructured Chrysler, would have to be patient.

There are lots of variations of Chapter 11. We need to be patient until Thursday, he said.


Source: upi



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