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Wednesday, July 25, 2007

Chrysler's Bankers: Long Walk, Short Pier?

by Calculated Risk on 7/25/2007 01:50:00 AM

From the WSJ: Chrysler's Bankers May Take On Debt

Chrysler's attempt to tap debt markets for $20 billion hit a critical juncture as bankers began discussing the likelihood that they will have to step up with a large part of the money because investor demand hasn't been strong enough.
The struggle to raise money from investors was the latest sign of how inhospitable debt markets have become recently. ... Chrysler's bankers -- including J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc., Bear Stearns Cos. and Morgan Stanley ... were yesterday discussing plans to take a half or more of a $10 billion piece of the Chrysler auto loan, people familiar with the matter said.

The debt to be held by the banks would bear the first losses if Chrysler has problems repaying. ... The $8 billion loan sale for Chrysler Financial, meanwhile, is still on track to be completed this week, though the company has had to increase the amount of interest it would pay on the debt.

It also needs to raise $42 billion, much of it to compensate Daimler for existing Chrysler debt it still holds. That sale isn't expected to be as difficult, because much of it will be backed by healthy Chrysler auto loans.