Chrysler debtholders reach tentative deal to avoid bankruptcy

WASHINGTON (AP) — A person familiar with the talks says the Treasury Department has reached a tentative agreement with four of Chrysler’s major debtholders as the automaker races to stave off bankruptcy.

Under the agreement, the four banks will forgo claims to the $6.9 billion worth of Chrysler debt they hold in exchange for $2 billion in cash when the deal closes, says the person, speaking on condition of anonymity because the agreement has not been formally announced.

The person says Treasury needs to convince all 46 banks and hedge funds that hold Chrysler debt to go along. If not, a bankruptcy filing could still be possible for the nation’s third-largest automaker.