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Chrysler creditors get offer from U.S Treasury.

By Amarendra Bhushan for CEOWORLD Magazine Updated:April 23, 2009

The US Treasury, ahead of the April 30 deadline for negotiations with Fiat, responded to Chrysler’s secured creditors, offering 5% ownership in a restructured Chrysler-Fiat partnership in exchange for slashing the principal on their $6.9 billion in loans to $1.5 billion.

The new offer comes after creditors, led by J.P. Morgan Chase, Morgan Stanley, Goldman Sachs, Citicorp and four hedge funds, asked to cut the debt to 4.9 billion in exchange for a 40 percent stake.

The Treasury early in April first proposed lenders to cut the debt to one billion dollars with no stake in exchange.

Chrysler has continued to work thatks to a 4 billion dollar emergency loan by the government.

The Treasury Department had earlier offered Chrysler’s lenders — which include Citigroup and JPMorgan Chase — just 15% of what they are owed, the reports said.

The Obama Administration has promised an additional 6 billion but has set a 30 April deadline for Chrysler to work out an agreement with lnders, trade unions and Fiat.

Under the new proposal, lenders would receive about 22% of the $6.9 billion they are owed. They would also receive a 5% equity stake in the restructured automaker, the Wall Street Journal and New York Times reported.

The equity stake would go to first-lien lenders including Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and several smaller banks, plus some hedge funds. Chrysler has about 45 first-lien lenders who would be first in line to get money if the company’s assets were liquidated.

Including the secured debt and government loans, Chrysler owes about $23.5 billion, including $10.6 billion to a United Auto Workers trust fund that will take over retiree health care costs starting next year.

It also owes $1 billion each to its owners, Cerberus Capital Management LP and Daimler AG.

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