UPDATE 2-Chrysler lenders preparing counter offer-sources

* Chrysler lenders' preparing new counter-offer
* NY Times says Obama admin preparing bankruptcy filing
* Treasury expects "small percentage" of recovery on loans

(Adds Treasury comment on loan recovery, Chrysler comment on
NY Times report)
By Jui Chakravorty Das and Poornima Gupta
NEW YORK/DETROIT, April 23 (Reuters) - Chrysler LLC's
first-lien lenders are preparing another counter-offer to the
U.S. Treasury that involves reducing the automaker's debt,
sources familiar with the matter said on Thursday.
The U.S. Treasury on Wednesday offered the lenders $1.5
billion and a 5-percent equity stake in a restructured Chrysler
in exchange for about $7 billion of debt they now hold.
The lenders' steering committee is preparing a
counter-offer that would include better terms for the lenders,
and the offer should be ready "soon," one of the sources said.
The lenders had initially offered to retain about $4.5
billion in debt and take a 40-percent stake in a new Chrysler
supported by government investment and a deal with Italian
automaker Fiat SpA .
That would have marked a much richer payout for the
creditor group than U.S. officials first offered the banks,
when they were asked to write off almost $6 billion in debt for
no equity that would allow the lenders to benefit from a
recovery from the automaker.
The committee representing Chrysler lenders includes the
banks that helped finance Chrysler's 2007 sale to private
equity firm Cerberus Capital Management : JPMorgan
Chase & Co , Morgan Stanley , Citigroup Inc
and Goldman Sachs Group .
The committee was broadened earlier this month to also
include Oppenheimer Funds, Stairway Capital Management, Elliott
Management and Perella Weinberg Partners.

BANKRUPTCY POSSIBLE
Chrysler has been loaned $4 billion in emergency funds by
the U.S. government and has asked for another $5 billion to
operate.
The White House-appointed autos task force has given
Chrysler until the end of the month to reach agreements for an
alliance with Fiat, a reduction in secured debt and resolution
of labor issues with its unions.
Without those deals, the Obama administration has said it
would cut off funding for Chrysler. The automaker has said such
a move would send it into a bankruptcy to liquidate assets.
Separately, the New York Times said on its website the U.S.
Treasury is preparing a Chapter 11 bankruptcy filing for
Chrysler that could come as soon as next week, citing unnamed
sources.
In response to the New York Times report, Chrysler said it
would continue to work through the end of April to secure the
support of the necessary stakeholders and reach a conclusion
the Obama administration and U.S. Treasury "deems appropriate."
Meanwhile, the Treasury expects only a "small percentage"
of recovery on the loans it has given to Chrysler in case the
automaker liquidates its assets in bankruptcy, a report by the
Government Accountability Office (GAO) said on Thursday.
"According to Treasury, in the case of Chrysler, the sale
of the assets would result in cash equal to only a small
percentage of the value of the loans," the GAO, the
investigative arm of Congress, said in the report.
The Treasury was unable to obtain senior liens on most
assets as they were already encumbered, the report said.
This is the first time the U.S. government has
characterized the potential recovery of the loans it has given
Chrysler, or laid out the rationale behind its decision to
accept third lien credit behind banks and Daimler AG
and Cerberus Capital Management.
(Reporting by Jui Chakravorty and Poornima Gupta; editing by
Tim Dobbyn and Carol Bishopric)
((jui.chakravorty@reuters.com; 646-23-6033; Reuters
Messaging:jui.chakravorty.reuters.com@reuters.net))
Keywords: CHRYSLER LENDERS/

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