In possibly the last move before a Fiat alliance, Chrysler has reportedly agreed to a deal with lenders to greatly reduce the company’s debt. A debt-for-equity swap was seen as the last major hurdle in the way of a Chrysler-Fiat strategic alliance, with the obstacle now cleared.
According to Reuters, Chrysler reached an agreement with lenders and the U.S. Treasury Department earlier on Tuesday. Although the exact details of the deal remain unknown, the agreement will reportedly see Chrysler’s debt reduced from $6.9 billion to just $2 billion, with an undisclosed amount of Chrysler shares going to lenders.
The news comes just days after Chrysler secured landmark deals with its unions in the United States and Canada. Under the terms of that agreement, the UAW’s retirement fund will own 55 percent of the ‘new’ Chrysler, according to Bloomberg. The retiree trust will also receive representation on Chrysler’s board of directors.
Chrysler, currently surviving off $4.5 billion in government loans, is in a race for its life to meet President Obama’s April 30 deadline for restructuring. If Chrysler fails to ink a deal with Fiat – which hinges on debt reduction and further union concessions – the Michigan automaker could be forced into bankruptcy.
