Late Night Meeting Glitch with Lenders May Send Chrysler into Bankruptcy

AUBURN HILLS, MI - April 30, 2009: According to a story filed by two AP writers in the wee hours Thursday morning, a meeting on Wednesday between Chrysler and its hedge-fund lenders came to a disastrous end when the lenders insisted on a “better deal.”

The AP story states that, “To entice the hedge funds into going along with the banks, the government on Wednesday afternoon added $250 million to the $2 billion that the banks had settled for and gave the hedge funds a 6 p.m. deadline to work it out. But several of the funds came back with their own different counterproposals, leaving the Treasury Department to bargain with 46 funds. Treasury extended the deadline into the evening, but when it appeared there was no central authority to negotiate with, decided to end talks around midnight.” This information was supplied to the AP writers by two persons familiar with the situation on condition of anonymity because the negotiations were private.

One of the people added, “This is the one shot when everybody had a chance to say yes or no. You had 46 different people here, and they said no."

The final deadline to turn opinions around and get everyone on board is tonight, Thursday, at 11:59PM EDT. Apparently, even if the lenders do not acquiesce, and Chrysler is forced into Chapter 11, the deal between Chrysler and Italian automaker Fiat will still go forward.

Perhaps it will be to Chrysler’s best interest if the hedge funds don’t agree to a deal and Chrysler is allowed bankruptcy protection.

Yesterday afternoon Chrysler reached a tentative deal with the UAW on the concessions mandated by the Federal government.