Creditors pave way for Chrysler to exit bankruptcy

WASHINGTON - Chrysler took a giant step towards emerging from bankruptcy and joining Italy’s Fiat Spa after a group of the US carmaker’s creditors Friday gave up their hopes for a better deal.

Chrysler last week filed for bankruptcy protection after failing to strike an agreement with about one quarter of its smaller debt holders. But after a number of defections in the past few days, a lawyer for the remaining hold-outs said Friday they could no longer keep up their opposition.

‘After a great deal of soul-searching and quite frankly agony, (the creditors) concluded they just don’t have the critical mass to withstand the enormous pressure and machinery of the US government,’ Tom Lauria, the attorney representing the group said in a statement.

President Barack Obama last week blamed the small group, made up primarily of hedge funds, for failing to make sacrifices and forcing Chrysler into bankruptcy.

Chrysler’s case is currently before a bankruptcy court in New York. The Obama administration wants the court to accept a deal that offers creditors about one third of their outstanding debt.

That would pave the way for Chrysler to merge with Fiat, which will effectively take over management of the ailing carmaker.

Lauria said his group still believed they have been forced into an unfair deal, but would abide by whatever the court decides. Obama hopes Chrysler can emerge from bankruptcy within 60 days.