Report: US toughens terms for automaker creditors

NEW YORK (AP) — The federal government is pushing for tougher concessions from the creditors of General Motors Corp. and Chrysler LLC, according to a published report, as the troubled automakers face looming deadlines to restructure or seek bankruptcy protection.

The Treasury Department wants GM to offer its bondholders a small amount of its stock in exchange for their $29 billion of GM debt, The Wall Street Journal reported Friday, citing unnamed people familiar with the matter.

The new offer is much less generous than a similar offer GM made two weeks ago, which would have included cash, new debt and a much larger portion of the company's stock, according to the report.

The debt held by GM's bondholders has emerged as a major sticking point in the Detroit automaker's efforts to restructure. GM has been surviving on $13.5 billion in loans from the Treasury Department since the beginning of the year and last month requested up to $16.6 billion more.

However, the Obama administration's auto task force ordered GM last week to wring deeper concessions from its union, its bondholders and other stakeholders by June 1 as a condition for more money.

GM has said it is open to the prospect of a quick, "prepackaged" bankruptcy protection filing as a possible path to viability. However, it prefers to restructure out of court.

Chrysler, meanwhile, has been kept afloat by $4 billion in government loans. The auto task force believes the Auburn Hills, Michigan, automaker cannot survive as a standalone company. Last week, it gave Chrysler until May 1 to find a partner, most likely Italian automaker Fiat SpA, as a condition for another $6 billion in help.

If Chrysler fails to win more government help, it likely faces liquidation.

Most recently, the Obama administration is pushing Chrysler's creditors to give up about 85 percent of the nearly $7 billion in debt they hold, according to The Wall Street Journal. Some of the company's senior lenders, however, believe that if the company goes into bankruptcy they would get a much better offer — more than 70 cents to the dollar, the Journal said. Chrysler has said they would get much less.

Copyright 2009 The Associated Press.