As a bankruptcy filing by the American automaker Chrysler appeared all but certain, the White House announced Thursday morning that President Obama and members of the auto task force would address the fate of the company at noon.þþLast-minute efforts by the Treasury Department to win over recalcitrant Chrysler debtholders failed Wednesday night, , according to people briefed on the talks. Barring a last-minute agreement, Chrysler was expected to seek Chapter 11 protection, most likely in New York, these people said. þþThe automaker, which is in talks with the Italian automaker Fiat, would file for bankruptcy first. It subsequently would present an agreement with Fiat to the court for approval, possibly on Monday, these people said. They requested anonymity because they were not authorized to speak for the government.þþA bankruptcy filing by Chrysler would be the first by one of Detroit’s three auto companies amid a devastating slump, and could serve as a preview of what a filing by General Motors might look like. G.M., which like Chrysler received federal assistance last year, faces a June 1 deadline for its own restructuring.þþTo win over several hedge funds, which have been holding out for better terms, the Treasury increased its cash offer to holders of Chrysler’s secured debt by $250 million, to $2.25 billion, these people said. If all of the secured holders would agree to the new deal, which would give them the cash in exchange for retiring about $6.9 billion of debt, Chrysler would still have a chance of restructuring out of bankruptcy court.þþSeveral investment funds, however, continued to reject the Treasury’s sweetened offer at a vote of the lenders on Wednesday evening, people familiar with the talks said.þþDuring a prime-time press briefing at the White House on Wednesday, President Obama appeared to lay groundwork for a Chrysler bankruptcy filing, although he said it was “not yet clear” Chrysler would have to move forward with one. “I am actually very hopeful, more hopeful than I was 30 days ago, that we can see a resolution that maintains a viable Chrysler automobile company out there.” þþHe added: “The fact that the major debtholders appear ready to make concessions means that even if they ended up having to go through some sort of bankruptcy, it would be a very quick type of bankruptcy.”þþThe four big banks that own 70 percent of Chrysler’s secured debt have already signed on to the Treasury’s plan and are trying to line up the other lenders in favor of the new terms.þþIf all 46 lenders do not agree to the new offer, and a bankruptcy filing occurs, the lenders will be forced to accept the $2 billion they were originally offered or fight in court for a higher amount.þþThe Obama administration is adamant that every lender participate in the debt swap, according to people close to the talks. One reason is that the deal would face legal challenges.þþPeople briefed on the negotiations said that while it seemed certain Chrysler would survive and avoid liquidation, it was not yet clear whether it would have to be placed into bankruptcy to sort through any unresolved issues with creditors. þþAdministration officials said late Wednesday that while bankruptcy remained a possibility, talks with all of the stakeholders in Chrysler still could continue right up to an administration-imposed deadline at 11:59 p.m. Thursday.þþThe administration gave Chrysler until Thursday to complete an agreement with Fiat, and avoid court protection. But it became clear in the last week that bankruptcy might be needed to allow Chrysler to shed debt, close dealerships and rid itself of other liabilities, in order to make itself a more attractive partner for the Italian auto company.þþA bankruptcy filing could lead to a prolonged battle in court with the company’s lenders, dealers and parts suppliers across the country. In bankruptcy, the government would also have to provide financing for the company to operate.þþTwo people close to Michigan’s Congressional delegation said Wednesday that Mr. Obama would probably opt for a bankruptcy filing, which would be intended to be executed in as little as 60 days.þþPublicly, Chrysler officials remained hopeful Wednesday that the company could avoid bankruptcy. In a letter to employees, Chrysler’s chairman, Robert L. Nardelli, said the company was making progress with Fiat and hoped to have a deal in hand by Thursday.þþ“I’m encouraged by this progress and I want you to know I deeply appreciate the sacrifices made by so many constituents to help us reach the restructuring targets established by the government,” Mr. Nardelli said.þþThere was no immediate comment from Fiat.þþAny deal with Fiat would involve management changes, including the departure of Mr. Nardelli, who joined the company in August 2007. Mr. Nardelli told employees this month that he was likely to leave Chrysler.þþThe new management is likely to take charge of Chrysler as soon as agreements with the Treasury Department are completed, people briefed on the situation said.þþIf there is a bankruptcy filing, the new management team will lead the company until it has finished restructuring. It was not clear whether one of Chrysler’s executives or a Fiat executive would head the company.þþChrysler, subsisting on $4 billion in federal loans, has asked for another $7 billion in government aid to carry it through the worst automotive market in the United States in 25 years.þþBut members of the president’s special auto task force are unsure the company can be viable for the long term without the use of what has been called a “surgical bankruptcy.”þþAs the talks with Fiat and the lenders entered the final hours, members of the United Automobile Workers union approved a historic deal in which the union would take a 55 percent stake in Chrysler. The stake would finance half of a new trust to administer retiree health care costs.þþNick Bunkley, Jack Healy, Jim Rutenberg and Bill Vlasic contributed reporting.þþ
Source: NY Times
