May 6, 2009 1:11 PM
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Chrysler Won't Pay Back U.S. Loans
(AP Graphics)
Testifying in bankruptcy court on Monday, one of the top financial advisers overseeing Chrysler's restructuring said the U.S. government may never get back its loans to the company.
"They're offering financing with a low likelihood of being repaid," said Robert Manzo, an executive director for Capstone Advisory Group LLC, according to the Associated Press.
Manzo's comments mirror the assumptions he listed in Chrysler's bankruptcy filings last week, CNN Money reports. As part of its Chapter 11 reorganization, Manzo wrote Chrysler expects the U.S. Treasury to forgive a $4 billion bridge loan the automaker received during the Bush administration, a $300 million fee on that loan, and the $3.2 billion in financing the Obama administration approved last week to help the company stay afloat while it is in bankruptcy.
The Obama administration confirmed to CNN on Tuesday that it does not expect Chrylser to repay the loans.
A portion of the bridge loan, however, may be recovered from the assets of Chrysler Financial, which is suspending its lending business as part of Chrysler's bankruptcy filing. Additionally, the Treasury has an 8 percent equity stake in the new Chrysler that the administration sees as compensation for the lost money.
The U.S. government is prepared to lend Chrysler an additional $4.7 billion after its restructuring under the presumption those funds will be paid back. The judge overseeing Chrysler's restructuring approved on Wednesday the first step in the process, which is the sale of assets to Italy's Fiat Group SpA.
Chrysler's sales fell 48 percent in April compared with the same month last year, according to Autodata Corp., although consumers may be listening to President Obama's plea to continue buying Chrysler cars. Since the company filed for bankruptcy last Thursday, the number of visitors shopping for Chrysler models on Edmunds.com increased 15 percent.
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Stephanie Condon Stephanie Condon is a political reporter for CBSNews.com.
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