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Chrysler in bankruptcy filing as debt restructuring fails
By Poornima Gupta |
May 1, 2009, Friday
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Print Edition
Print Edition
CHRYSLER LLC was going to file for Chapter 11 bankruptcy late yesterday after talks to restructure its debt with bondholders collapsed, a United States government official said.
Chrysler failed to gain the bondholder support it needed to move forward with a restructuring and avoid the first-ever bankruptcy filing by a major US auto maker.
The Chapter 11 filing, which sources said would be done in US Bankruptcy Court in Manhattan, will send shockwaves through the entire auto industry - including Chrysler's rivals, suppliers, dealers and the many hundreds of thousands who rely on the industry for their livelihoods.
The filing does not preclude a deal with Fiat. Chrysler has been seeking a rescue deal from the Italian auto maker while also trying to finalize a debt forgiveness agreement from its lenders.
Before the bankruptcy news, signals about the discussions with Fiat were mixed. The Italian newspaper Corriere Della Serra reported yesterday morning that a deal had been signed, but Fiat later denied this.
The debt talks have been spearheaded by the Obama administration's auto task force and ex-investment banker Steve Rattner.
In a bid to win over three fund firms that had spurned an offer to accept US$2 billion in cash in exchange for writing off all of Chrysler's US$6.9 billion in secured debt, US officials sweetened the terms by throwing in another US$250 million, people familiar with those discussions said.
About 45 financial institutions hold Chrysler's secured debt.
In an earlier memo to employees obtained by Reuters, Chrysler Chief Executive Robert Nardelli had said reaching an agreement with lenders was the company's main focus.
Chrysler, majority-owned by Cerberus Capital Group, is among the car industry's laggards, but its plight reflects a slump in demand facing an industry whose US$2.6 trillion annual revenue is equivalent to the GDP of France and which employs over 9 million people.
The bankruptcy marks another key moment for the struggling American manufacturing sector.
In 1925, Walter P. Chrysler established Chrysler Corp. Three years later, the company laid the cornerstone for the Chrysler Building, briefly the world's tallest building and still an unmistakable part of the Manhattan skyline.
On Wednesday, US President Obama said that concessions by Chrysler's unions and its major bank lenders had made him more hopeful than a month ago that the struggling auto maker could be made viable.
Chrysler failed to gain the bondholder support it needed to move forward with a restructuring and avoid the first-ever bankruptcy filing by a major US auto maker.
The Chapter 11 filing, which sources said would be done in US Bankruptcy Court in Manhattan, will send shockwaves through the entire auto industry - including Chrysler's rivals, suppliers, dealers and the many hundreds of thousands who rely on the industry for their livelihoods.
The filing does not preclude a deal with Fiat. Chrysler has been seeking a rescue deal from the Italian auto maker while also trying to finalize a debt forgiveness agreement from its lenders.
Before the bankruptcy news, signals about the discussions with Fiat were mixed. The Italian newspaper Corriere Della Serra reported yesterday morning that a deal had been signed, but Fiat later denied this.
The debt talks have been spearheaded by the Obama administration's auto task force and ex-investment banker Steve Rattner.
In a bid to win over three fund firms that had spurned an offer to accept US$2 billion in cash in exchange for writing off all of Chrysler's US$6.9 billion in secured debt, US officials sweetened the terms by throwing in another US$250 million, people familiar with those discussions said.
About 45 financial institutions hold Chrysler's secured debt.
In an earlier memo to employees obtained by Reuters, Chrysler Chief Executive Robert Nardelli had said reaching an agreement with lenders was the company's main focus.
Chrysler, majority-owned by Cerberus Capital Group, is among the car industry's laggards, but its plight reflects a slump in demand facing an industry whose US$2.6 trillion annual revenue is equivalent to the GDP of France and which employs over 9 million people.
The bankruptcy marks another key moment for the struggling American manufacturing sector.
In 1925, Walter P. Chrysler established Chrysler Corp. Three years later, the company laid the cornerstone for the Chrysler Building, briefly the world's tallest building and still an unmistakable part of the Manhattan skyline.
On Wednesday, US President Obama said that concessions by Chrysler's unions and its major bank lenders had made him more hopeful than a month ago that the struggling auto maker could be made viable.
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