The government has demanded that both General Motors and Chrysler Corporation to put more pressure on their secured creditors.  Standard and Poor has lowered its recovery projections for the lenders to the auto companies in the event they default with bankruptcy.  Chrysler has 7 billion dollars outstanding in first-lien loans which are held by large banks and other institutions. S & P says creditors may expect only 30 to 50 cents on the dollar if they file for bankruptcy.  Some of the lenders were hoping for as much as 70 cents on the dollar.  Per the Treasury, lenders may receive only 15 cents.

The outlook for the secured debt holders of Detroit based GM is somewhat better as they may allegedly expect 70 - 90% in the event of default and bankruptcy.  The secured debt is back by the rights to the auto makers assets should default occur.  S & P believes that if Chrysler defaults through bankruptcy, large parts of the company would be broken up and sold.

General Motors has been given the opportunity to strike a deal with stakeholers by the end of May while Chrysler has the end of April for its deadline.  S & P cut ratings for both companies in part because bankruptcy experts have suggested that filing bankruptcy by both companies is likely.