Chrysler's main creditors reach deal with U.S.; others hold out

The U.S. Treasury Department has reached a tentative debt-reduction agreement with Chrysler's main creditors but still must get other lenders to sign on for the deal to take effect, three people with knowledge of the talks said today.

The accord with JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley would reduce Chrysler's $6.9 billion debt to $2 billion, which would be repaid by Chrysler in cash, they said.

For the deal to become formal, all of Chrysler's lenders have to agree. The group, comprised of about 45 banks and hedge funds, has until Thursday to sign on to the agreement under the deadline imposed by the Obama administration for Chrysler to forge an alliance with Italy's Fiat S.p.A. and qualify for $6 billion in additional U.S. aid.

All stakeholders sacrifice

"The agreement from Chrysler's principal banks is an exceptional accomplishment in line with the president's firm commitment that all stakeholders sacrifice to make this deal succeed," said an administration official who declined to be identified.

The four banks hold about two-thirds of Chrysler's debt.

UAW workers are voting on an agreement that would give them a 55 percent stake in Chrysler while reducing Chrysler's cash payments to a retiree health-care trust, a person familiar with the matter told Automotive News late Monday.

Fiat's stake in Chrysler is scheduled to climb from 20 percent initially to 35 percent.

Chrysler spokeswoman Shawn Morgan declined to comment on an earlier Washington Post report of the deal.

By Neil Roland- Automotive News