Put A Fork In Chrysler, GM Showdown Next

The last-ditch negotiations to save Chrysler from bankruptcy court broke down last night, so the company is preparing to go Chapter 11 today. 

This won’t make much difference, of course.  The stockholders (Cerberus) were going to get wiped out either way.  And bankruptcy will likely make it easier to force new terms on Chrysler’s dealers.

Next up is GM, whose bondholders rejected the government’s initial offer and have reportedly returned with a counter-offer.

Here’s Chrysler:

WSJ: Talks between the Treasury Department and lenders aimed at keeping Chrysler LLC out of bankruptcy broke down Wednesday, making it all but certain the car maker will file for Chapter 11 protection Thursday, according to people familiar with the discussions.

Administration officials, who have been braced for a Chrysler bankruptcy filing for weeks, say all the pieces are in place to get the company through the court quickly, perhaps in a matter of weeks.

The talks with Chrysler’s lenders broke down after the Obama administration’s automotive task force worked into the evening to persuade several hedge funds and other lenders to accept a deal to reduce Chrysler’s debt, said people involved in the talks.

The Treasury boosted its most recent offer to lenders on Wednesday by $250 million to $2.25 billion in cash for the banks and hedge funds to forgive $6.9 billion in Chrysler debt, people familiar with the matter said.

J.P. Morgan Chase & Co., which leads the creditor group as Chrysler’s largest lender, gave the other 45 banks and hedge funds 90 minutes Wednesday to vote on the deal. A large number of the funds voted no and refused to budge, paving the way for an all but unavoidable trip to bankruptcy court, said people close to the talks.

Read the whole thing >

GM’s bondholders, meanwhile, will make their counter-offer today.  Instead of the 10% equity stake that they were offered, the bondholders want control of the company.

Bloomberg: General Motors Corp.’s bondholders plan to present a counteroffer to President Barack Obama‘s auto task force in Washington today that would give them control of the carmaker, according to a person familiar with the committee representing creditors

The bondholder committee plans to reject GM’s April 27 debt exchange offer that asked them to swap all their claims for a 10 per cent stake in the reorganized automaker, said the person, who declined to be identified because the negotiations are private….

GM bondholders are proposing they get a 51 per cent stake in the reorganized carmaker, the health-care fund get a 41 per cent share, and common shareholders get 1 per cent ownership, the person said. This structure would enable the U.S. Treasury to be paid back and avoid nationalization of GM, the person said.


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