$40B in bankruptcy aid sought for GM, Chrysler
February 23, 2009
Report: $40B in bankruptcy aid sought for GM, Chrysler
BY JULIE ARMSTRONG
FREE PRESS STAFF WRITER
Outside advisers to the U.S. Treasury have started lining up the largest bankruptcy loan ever, talking with banks and other lenders about at least $40 billion in financing for General Motors and Chrysler in case the two automakers need it, the Wall Street Journal reports.
Administration officials said they are trying to find a way to restructure the two companies without resorting to bankruptcy proceedings, and that the latest efforts are "due diligence."
Initial discussions call for private banks to provide the financing, with the government guaranteeing or backstopping the loan. Lenders are reluctant to commit funding to GM or Chrysler for several reasons — most are concerned they won’t get all their money back. The government advisers also are looking at ways the Treasury could "prime" banks making the debtor-in-possession, or DIP, loans, so the government could be paid back before private creditors.
The estimated $40 billion in DIP financing that GM and Chrysler would need would be five times as large as the previous record for such financing, which is used to fund day-to-day operations while companies sort out their debt.