WRAPUP-S&P cuts debt ratings on GM, Chrysler

By Ransdell Pierson and Ilaina Jonas
NEW YORK, April 10 (Reuters) - Standard & Poor's on Friday
cut certain debt ratings of General Motors Corp and
Chrysler Holding LLC [CCMLPD.UL], citing lower likelihood of
recovery by their debtors in the event either carmaker
defaults on the loans or files for bankruptcy.
The rating downgrades put extra pressure on the two iconic
U.S. carmakers, whose already declining fortunes have worsened
during the ongoing global economic downturn.
GM, unlike Chrysler, likely would survive in the event of
bankruptcy, Standard & Poor's recovery analyst Greg Maddock
said in an interview.
"If Chrysler goes into bankruptcy, I would expect it to go
into liquidation -- that its assets would be sold in whole or
in part," Maddock said. "Instead of being reorganized, there
would be no carmaker after bankruptcy."
Maddock cut S&P's rating on General Motors' $4.5 billion
senior secured revolving credit facility deeper into junk, due
to a shrinking pool of assets available to repay lenders and
weak demand for its light vehicles.
"Basically GM is shrinking in terms of the assets they
secure," Maddock said. "The debt stays the same."
GM and Chrysler are operating under emergency U.S.
government loans. GM has been told by the Obama
administration's task force overseeing its bailout that it
must cut costs and reduce its debts in order to continue to
receive aid.
Chrysler, which has been operating under $4 billion of
loans from the task force, has been offered up to $6 billion
more if it completes an alliance with Italy's Fiat SpA
.

GM'S SLIPPING ASSETS, WEAK CAR SALES
S&P lowered the rating on GM's revolver to CCC-minus from
CCC and revised its recovery rating to 2 from 1, reflecting
S&P's view that lenders should expect less recovery in the
event of a payment default.
Should GM default or file for Chapter 11 bankruptcy
protection, holders of its senior secured revolver should
expect a 70 percent to 90 percent recovery of what they are
owed instead of the previous expectation of 90 percent to 100
percent, S&P said.
"The lowering of the rating on the revolving credit
facility reflects our view of persistently weaker demand for
light vehicles in North America, as well as declining pools of
assets securing the revolving credit facility," Maddock said
in a statement.
The federal task force has required GM, the biggest U.S.
automaker, to reach agreements to slash some $28 billion of
unsecured debt and restructure funding of a trust for union
retirees by June 1. The alternative raised by the task force
could be a bankruptcy filing.
News reports have said GM may only offer bondholders a
small equity stake in the company, with no cash or new debt.
GM has declined to comment on the status of discussions
with bondholders.
S&P kept GM's corporate credit rating at CC, reflecting
its view of the likelihood that GM will default -- through
either a bankruptcy or a distressed debt exchange.

CHRYSLER DEBT ALSO DEEMED RISKIER
S&P also offered a more wary view on Chrysler, cutting
debt ratings on its loans due in 2013 and 2014 and
citing a lower potential recovery by debtors in the event of
payment defaults by the carmaker.
Maddock lowered by two notches S&P's issue-level ratings
on Chrysler's senior secured first-lien term loan due 2013 to
CC from CCC. S&P said its downgrade indicates lenders can
expect an average recovery of 30 percent to 50 percent in the
event of a payment default.
The ratings agency said its corporate credit rating on
Chrysler was left intact, at CC, reflecting no change in its
view of the likelihood of default by Chrysler from either a
bankruptcy or a distressed debt exchange.
S&P lowered its issue rating on the carmaker's senior
secured second-lien term loan due 2014 by one notch to C from
CC, suggesting lenders can expect a negligible to a 10 percent
recovery if a default occurs.
"The lowering of our issue ratings reflects lower recovery
estimates, given our current view that Chrysler would be
unlikely to emerge from bankruptcy as one reorganized entity,"
Maddock said in his report.
(Reporting by Ransdell Pierson and Ilaina Jonas; Editing by
John Picinich and Jan Paschal)
((Reuters Messaging:
ransdell.pierson.reuters.com@reuters.net; 646-223-6034;
ransdell.pierson@reuters.com))
Keywords: GM/CHRYSLER

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