Motor manufacturer Chrysler is to have its debt slashed by the US Government in a bid to prevent it going into bankruptcy, it has emerged.
The company is facing a Thursday deadline to announce restructuring proposals that will keep it afloat and safeguard its remaining 54,000 employees' jobs.
Chrysler already has a tentative agreement with the United Auto Workers union and is in talks with Italian manufacturer Fiat.
Now that its biggest lenders have reached a deal with the Treasury Department to cut its debt, it is hoped that the company can be saved.
The agreement, which has not been formally announced, is understood to involve Chrysler's secured creditors accepting $2 billion (£1.35 billion) in cash to settle its $6.9 billion (£4.67 billion) debt.
Mike Boudreau, a director at bankruptcy advisors O'Keefe & Associates, said: "I think this has moved the needle more toward a turnaround.
"They still could file for bankruptcy, but they also could go into it with some hope of reorganising too."
Copyright © Press Association 2009