EQUIPO NIZKOR |
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23Feb09
Treasury considers GM and Chrysler funding options
Outside advisers to the Treasury are lining up contingency financing options for General Motors Corp and Chrysler LLC as part of a review of restructuring options for the auto makers, a Treasury official said on Monday.
The official commented to Reuters after the Wall Street Journal reported that outside advisers to the Treasury were talking with lenders about financing of at least $40 billion for the car companies, in case the two auto makers needed it.
People involved in talks with senior administration officials told the paper that the administration believes that the option of Chapter 11 filings by the two auto makers needs to be seriously considered.
"Everything is on the table right now," one person involved in the matter told the paper, adding that President Barack Obama does not want to see more massive job losses in the auto industry.
The Treasury official told Reuters that the action is not an indication of future plans for the companies, but is aimed at ensuring all options are properly considered and made available.
The administration also does not want to anger the United Auto Workers union by appearing to push for bankruptcy, the Wall Street Journal report said, citing the person involved in the matter.
The initial discussions call for private banks to provide the financing known as a debtor-in-possession (DIP) loan with the government guaranteeing or backstopping the loan, the paper said.
In this scenario, some of the financing would be used to pay back the $17.4 billion the government lent GM and Chrysler late last year, the paper said.
Treasury advisers are handling the effort and keeping GM and Chrysler informed of the steps through back-door channels, the paper said, citing people familiar with the matter.
Recently, government advisers have aggressively courted big lenders Citigroup Inc and J.P. Morgan Chase & Co,, which have also received government aid, to participate in any bankruptcy financing, the paper said, citing people familiar with the matter.
Last week, GM and Chrysler requested nearly $22 billion in U.S. government loans, on top of $17.4 billion received so far, and said they had reached tentative deals with the United Auto Workers union to reduce labor costs.
[Source: Reuters, NY, 23Feb09]
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