U.S. sees "small" recovery if Chrysler liquidates

DETROIT (Reuters) - The U.S. Treasury sees a "small percentage" of recovery on the loans it has given to Chrysler LLC in case the automaker liquidates its assets in bankruptcy, a report by the Government Accountability Office (GAO) said on Thursday.

"According to Treasury, in the case of Chrysler, the sale of the assets would result in cash equal to only a small percentage of the value of the loans," the GAO, the investigative arm of Congress, said in the report.

The U.S. Treasury was also unable to obtain senior liens on most Chrysler assets as they were already encumbered, the report said.

The Treasury was only able to obtain senior lien on a portion of the company's parts inventory called Mopar.

This is the first time the U.S. government has detailed its estimates of recovery of the loans it has give Chrysler or laid out the rationale behind its decision to accept third lien credit behind banks and Daimler AG and Cerberus Capital Management.

Chrysler has been loaned $4 billion in emergency funds by the U.S. government. The automaker has asked for another $5 billion to operate.

(Reporting by Poornima Gupta and John Crawley)