UPDATE 1-Chrysler lenders make new debt restructuring offer

* Chrysler lenders offer to cut debt to $3.75 bln
* Drop request for Fiat investment, preferred stake
* Proposed terms would give creditors 40 pct equity stake

(Adds detail from debt restructuring offer, updates sourcing)
By Jui Chakravorty Das and Poornima Gupta
NEW YORK/DETROIT, April 24 (Reuters) - Chrysler LLC's
lenders offered to cut the amount they are owed in a proposal
to the Obama administration that points to an acceleration in
the pace of high-stakes debt restructuring talks, according to
two people with direct knowledge of the proposal.
Chrysler's lenders are owed almost $7 billion and face
pressure to accept a reduced amount of debt and equity in a
restructured automaker ahead of an April 30 deadline for
Chrysler to clinch an alliance with Italy's Fiat SpA .
In their second offer to U.S. officials, which was
delivered on Friday, Chrysler's lenders are seeking $3.75
billion in debt and a 40 percent equity stake, according to one
of the people who asked not to be named because of the
confidential nature of the talks.
The offer represents a $750 million concession compared
with the $4.5 billion in remaining debt the Chrysler creditors
had asked for earlier this week.
In other concessions, the lenders dropped requests that
Fiat invest another $1 billion in Chrysler and that they be
given $1 billion in preferred equity in the automaker, one the
people with knowledge of the proposal said.
Earlier this week, U.S. Treasury officials offered the
Chrysler lenders $1.5 billion in first-lien debt and a 5
percent equity stake.
Representatives of Chrysler and the U.S. Treasury could not
be immediately reached for comment.
U.S. officials argued the earlier request from the banks
was unreasonable given the trading levels for Chrysler's debt
and the most recent estimates of what the lenders could look to
recover in bankruptcy, the second source said.
Chrysler's debt is trading near 15 cents on the dollar.
Moody's Investors Services has estimated the recovery in a
default could be as low as 20 cents on the dollar.
The latest offer from Chrysler's lenders amounts to a
request for a payout of about 54 cents on the dollar in
remaining debt.
Rep. Gary Peters, a Michigan Democrat whose district
includes Chrysler's headquarters, said the latest offer from
Chrysler creditors did not go far enough.
"Today's offer was still far from reasonable," Peters said
in a statement. "I am pleased that the pace of negotiations has
accelerated and am hopeful that debt holders will accept a fair
deal so that Chrysler can avoid bankruptcy and hundreds of
thousands of families will be protected."
The committee representing Chrysler lenders includes
JPMorgan Chase & Co , Goldman Sachs Group Inc ,
Morgan Stanley and Citigroup Inc .
One of the sources said Chrysler's lenders still want a
seat on the board at a restructured Chrysler as part of a
shake-up at the foundering U.S. automaker that is expected to
include the departure of Chief Executive Bob Nardelli.
The task force, which is headed by former investment banker
Steve Rattner, has said it is willing to invest another $6
billion in Chrysler if the struggling automaker can complete
the Fiat alliance and agreements to cut debt and costs with its
creditors and major unions.
Chrysler has about $7 billion in first-lien loans that stem
from its breakaway from Daimler AG in 2007. Daimler
still holds a stake of nearly 20 percent in Chrysler although
it has written down that investment to zero.
Chrysler, which is now 80 percent-owned by Cerberus Capital
Management, lost $8 billion in 2008 and has warned it could be
forced to liquidate without new funding.
(Editing by Andre Grenon)
((jui.chakravorty@reuters.com; 646-23-6033; Reuters
Messaging:jui.chakravorty.reuters.com@reuters.net))
Keywords: CHRYSLER LENDERS

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