Talks between the Treasury Department and lenders to keeping U.S. automaker Chrysler out of bankruptcy broke down late Wednesday, making it all but certain the company will file for Chapter 11 protection Thursday, the Wall Street Journal reports, citing people familiar with the discussions.
All the pieces are in place to get Chrysler through the court quickly, perhaps in a matter of weeks, say administration officials.
The talks with Chrysler’s lenders broke down after the Obama administration’s automotive task force worked to persuade several hedge funds and other lenders to accept a deal to reduce Chrysler’s debt, said people involved in the talks, the Journal reports.
According to people familiar with the matter, the Treasury raised its most recent offer to lenders on Wednesday by $250 million to $2.25 billion in cash for the banks and hedge funds to forgive $6.9 billion in Chrysler debt.
The Journal reports JPMorgan Chase(JPM Quote), Chrysler’s largest lender, gave the other 45 banks and hedge funds 90 minutes Wednesday evening to vote on the deal. A large number of the funds voted no and wouldn’t budge, paving the way for an all but unavoidable trip to bankruptcy court, said people close to the talks.
The news comes a few hours after President Barack Obama said Wednesday evening in a press conference he is “very hopeful” that deals can be worked out to keep Chrysler a viable automaker, and he is more hopeful than he was a month ago that the company will stay in business.
The bankruptcy process should pave the way for Italy’s Fiat to take over the American automaker, according to the Journal.
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