DETROIT - Banks and hedge funds that hold $6.9 billion in Chrysler debt have proposed forgiving $2.5 billion of it in exchange for about a 40 percent stake a Chrysler-Fiat alliance, according to two people briefed on the idea.

One of the people said the lenders delivered their counterproposal to Chrysler and the U.S. Treasury Department late Monday night. Neither person wanted to be identified.

The lenders also want Fiat to invest $1 billion cash in Chrysler, and they want to appoint a person to the company's board, according to term sheets obtained by The Associated Press.

The counteroffer comes as Chrysler races to meet a government-imposed April 30 deadline to swap debt for equity, cut labor costs and negotiate an alliance with Italy's Fiat Group SpA. If it misses the deadline, government aid will end and Chrysler likely faces liquidation.

Last week, creditors rejected a Treasury Department offer to reduce the debt to $1 billion, absolving Chrysler of about 85 percent of its secured loans. The counteroffer, which would swap about 35 percent of the debt for equity, falls short of government restructuring goals that called for Chrysler to retire at least two-thirds of its debt.

Michigan Gov. Jennifer Granholm criticized the creditors Tuesday night for failing to relieve Chrysler of more of its debt even as they benefit from federal bank bailout aid.

"Our economy is in turmoil as a result of Wall Street's irresponsible actions, and now some of the very institutions that received $90 billion in federal support are turning their backs on a company that employs tens of thousands of American workers," Granholm said in a statement.

After the counteroffer was made public Tuesday, Moody's Investors Service lowered its rating of Chrysler's corporate family of debt one notch from "Ca" to the lowest possible rating, "C," indicating "the certainty that Chrysler ... will file for bankruptcy" or restructure its debt in a way that would be considered a default for ratings purposes. The ratings agency also lowered its estimated rate at which creditors would recover their debt to 20 percent from 50 percent.