Although it reached an agreement with a few major creditors, Chrysler can’t strike a deal with other creditors to reduce its debt. Their reluctance to deal may force the company to file for bankruptcy as early as tomorrow.
Earlier this week, several lenders agreed to accept $2 billion in cash in lieu of the $4.83 billion Chrysler owes them. Those with ties to the remaining $ 2.07 billion aren’t willing to accept a reduced payment or a debt-for-equity swap, which casts significant doubt upon both Chrysler’s future and a possible merger with Fiat.
At this stage, the Detroit News claims the automaker will file for bankruptcy in the Southern District of New York, a court familiar with “complicated asset-sale transactions.” If a Section 363 filing should happen, a reformed Chrysler would contain only “good” assets and brands, and would ultimately be owned by the U.S. Treasury.
It’s rumored that the Treasury would leverage the $4 billion it loaned to Chrysler, along with a possible purchase of additional debt or equity, to purchase these assets. The News claims this procedure, referred to as a “surgical bankruptcy,” would allow the reformed Chrysler to emerge from the filing in as little as 30 days.
Bad assets, which include some dealer agreements and other debts, would likely remain in bankruptcy for longer period of time and ultimately sold off.
Source: The Detroit News