(The following statement was released by the rating agency)
April 30 -Standard & Poor’s Ratings Services today said it has lowered its corporate credit and other ratings on Chrysler LLC to ‘D’, reflecting the Administration’s announcement that the company will file for Chapter 11 bankruptcy in the United States.
The rating actions today are consistent with our previously published intentions to lower the ratings in the event of a bankruptcy filing or a distressed exchange. (For further details, please see our bulletin of April 27, 2009, “General Motors Corp., Chrysler LLC Take Steps To Avert Bankruptcy; Ratings Unaffected.”) We lowered the corporate credit rating on Chrysler to ‘CCC+’ in August 2008 and to ‘CC’ in December 2008.
“We believe the filing was caused by inadequate liquidity because we understand the company was unable to reach an agreements with all key parties and to otherwise satisfy the U.S. Treasury Department that it has an acceptable viability plan without the use of bankruptcy,” said Standard & Poor’s credit analyst Robert Schulz.
According to today’s announcement, Chrysler will not emerge from bankruptcy as a standalone entity but will form a new entity in which the government and other constituencies will have a stake. We expect assets, liabilities, and operations that are not included in the new entity to be disposed of through the bankruptcy process over time.
The recovery ratings on Chrysler’s senior secured debt remain at ‘4’ and ‘6’, indicating our expectation that lenders would receive average (30% to 50%) and negligible (0 to 10%) recovery, respectively, in the event of a payment default.
These ratings are under review as a result of the decision to file for bankruptcy, and if additional information is made available, we will provide an updated recovery analysis.