Chrysler Finally Files For Chapter 11 Bankruptcy Protection
The White House just announced that the third largest American automaker, Chrysler, will file for Chapter 11 bankruptcy protection and enter an alliance with Fiat SpA (BIT:F). The bankruptcy case, which is expected to be quick and “surgical”, will take place in the United States Bankruptcy Court in New York, and the filing marks the first American automaker to try to restructure under Chapter 11 since 1933 when Studebaker filed. A senior White House official said the case would commence immediately and the government would provide Chrysler with $3 to $3.5 billion debtor-in-possession financing so it could continue with daily operations. After completion of its restructuring plans, Chrysler will receive $4.5 billion in financing to restart operations. The embattled member of the Detroit Three has already received $4.5 billion in aid from the federal government.
Official: Chrysler to file for Chapter 11 bankruptcy
Following reports from late last night and early this morning that talks had broken down with lenders, Chrysler will officially announce its plan to file for Chapter 11 bankruptcy on Thursday. Negotiations between Chrysler and at least three lenders went on through the night, but no agreement was reached.
The news was revealed to Automotive News by an unnamed Obama administration official. The official said the Treasury Department upped its Chrysler debt-swap offer to $2.25 billion – up from $2 billion – but was unable to reach an agreement with the holdout creditors.
“While the Administration was willing to give the holdouts a final opportunity to do the right thing, the agreement of all other key stakeholders ensured that no hedge fund could have a veto over Chrysler’s future success,” the source told Automotive News.
Despite the pending Chapter 11 announcement, Chrysler is expected to forge ahead with an alliance with Fiat.
President Obama and his auto task force have scheduled a press conference for 12pm EST today, at which time the President will likely announce Chrysler’s Chapter 11 filing.
Categories: Business
