The Treasury reached an agreement with Chrysler LLC's lenders that may help the troubled automaker avoid bankruptcy, a source briefed on the matter said on Tuesday.
The details of the deal were not immediately available, the source said.
Chrysler's first-lien lenders, owed $6.9 billion in secured loans, have agreed to write down the debt to $2 billion, the Washington Post reported earlier on Tuesday.
The news comes as Chrysler races to meet a deadline of April 30 to complete an alliance with Italy's Fiat SpA and follows an announcement by Chrysler that it has also reached an agreement with the United Auto Workers leaders to modify the union's labor contract and to reduce the amount that the company owes a retiree health fund.
(Reporting by Poornima Gupta, editing by Gerald E. McCormick)