It now seems much more likely that Chrysler will avoid bankruptcy. BusinessWeek says that Chrysler and the US Treasury have reached a deal with the banks and private equity firms that hold Chysler’s debt.

“The agreement from Chrysler’s principal banks is an exceptional accomplishment in line with the President’s firm commitment that all stakeholders sacrifice to make this deal succeed,” a Treasury official told BW.

The whole operation now hinges on a partnership with Fiat. More details should be available on Thursday, the government’s deadline for reaching an agreement.

Bankruptcy for Chrysler Likely Averted as Banks Cave on Deb [BW]

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