The US government is pushing for tougher concessions from the creditors of General Motors Corp (GM) and Chrysler LLC, a published report said, as the troubled automakers face looming deadlines to restructure or seek bankruptcy protection.
The US Treasury Department wants GM to offer its bondholders a small amount of its stock in exchange for their US$29 billion of GM debt, the Wall Street Journal reported on Friday, citing unnamed people familiar with the matter.
The new offer is much less generous than a similar offer GM made two weeks ago, which would have included cash, new debt and a much larger portion of the company’s stock, the report said.
Representatives from GM and the government’s auto task force declined to comment. Messages were left seeking comment from Chrysler.
GM has been surviving on US$13.5 billion in loans from the Treasury Department since the beginning of the year and last month requested up to US$16.6 billion more.
However, the auto task force created by the administration of US President Barack Obama ordered GM last week to wring deeper concessions from its union, its bondholders and other stakeholders by June 1 as a condition for more money.
GM has said it is open to the prospect of a quick, “prepackaged” bankruptcy protection filing as a possible path to viability. However, it prefers to restructure out of court.
Chrysler, meanwhile, has been kept afloat by US$4 billion in government loans. The auto task force believes the Auburn Hills, Michigan-based automaker cannot survive as a standalone company. Last week, it gave Chrysler until May 1 to find a partner, most likely Italian automaker Fiat SpA, as a condition for another US$6 billion in help.
If Chrysler fails to win more government help, it likely faces liquidation.
Separately, credit ratings agency Standard & Poor’s on Friday cut several ratings on GM and Chrysler, citing their prospects for bankruptcy and the tough auto market. The ratings for both automakers are non-investment, or “junk,” grade.
The ratings agency also said creditors for both automakers can expect to take losses in the event of a default, with the losses for Chrysler’s lenders being greater. Chrysler is unlikely to emerge from a bankruptcy intact, S&P said.
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