In a new proposal sent to President Obama's automotive task force, Chrysler's lenders have laid out their demands in exchange for eliminating Chrysler's debt.
Last week, the President's task force had offered to pay the creditors - which include *** Morgan Chase, Morgan Stanley, Goldman Sachs and Citicorp - 15 cents for every dollar they are owed. Because the creditors' loans are secured by Chrysler assets such as factory equipment and intellectual, they are seeking a sweeter deal.
According to the proposal, the creditors want a 40 percent stake in a Chrysler-Fiat partnership and a seat on the new board of directors. They also want to see Fiat put $1 billion in cash directly into Chrysler. In exchange, the lenders would write off one-third of Chrysler's $6.9 billion in loans.
The proposal said that if Fiat didn't contribute cash to the deal, "there is the prospect of a wealth transfer from the U.S. taxpayer to a foreign company of potentially $10 billion or more."
Fiat had previously said that it would not put any money into Chrysler. However, Fiat CEO Sergio Marchionne had also said he did not plan on running Chrysler, while as recently as last week it was rumored that he could become Chrysler's new CEO.
An unnamed White House official blasted the proposal.
"It is neither in the interest of Chrysler's senior lenders nor the country for them to advance a proposal that would yield them an unjustified return as Chrysler, its employees, other stakeholders are working tirelessly to help this company restructure," the official said.
In addition, the lenders want their remaining $4.5 billion debt stake paid back before any loans backed by U.S. taxpayers, so they would be repaid before the government if Chrysler files for bankruptcy, and they want Chrysler Financial's viability backed by taxpayer dollars.
Source: The Detroit Free Press