Chrysler lenders offer to forgive $2.5 billion in exchange for 40% in Chrysler/Fiat alliance

According to sources familiar with the matter, banks and hedge funds that hold $6.0 billion in Chrysler LLC debt have proposed forgiving $2.5 billion in exchange for a 40 percent stake in a Chrysler and Fiat alliance. Sources that didn’t want to be identified said that the lenders delivered their proposal to Chrysler and the U.S. Treasury Department on Monday night.

The term sheets obtained by The Associated Press said that the lenders also want Fiat to invest $1 billion cash in Chrysler. They also want to appoint one person to the new alliance’s board.

The counteroffer comes as Chrysler closes in on its April 30th deadline imposed by the Obama administration to swap debt for equity, cut worker costs and complete an alliance with Fiat. If the deadline is missed, Chrysler will be forced to liquidate.

– By: Omar Rana

Source: MSNBC