It has been reported that demand for Fiat's new seven-year Euro bond issue has reached more than 1.5 billion euros, more double the amount that was expected to be raised. Fiat CEO Sergio Marchionne officially launched the new bond issue last week.

This morning, influential Italian newspaper Il Sole 24 Ore, quoting well placed unnamed sources, stated that demand had now reached around 1.5 billion euros, with the bonds expected to yield around 6.625-6.750pct annually. Other financial sources today, including the Financial Times, have predicted that demand could even reach as high as 2.5 billion euros.

Marchionne expected to raise around 750 million euros from the bond issue, which is Fiat's first venture into this market for several years. The bond will run until 2013. The cash raised from it will be used "for general corporate purposes, including potentially refinancing of the Fiat Group's existing debt," said a Fiat statement. It is expected that the ceiling of the seven-year bond issue may now be raised to bring in around the 1 billion euros. Four leading banks: Barclays Capital, BNP Paribas, UBM and Citigroup are managing the bond issue sale.
 

The strong demand for Fiat's new bond issue signifies the financial market's approval for the strategy to turnaround the company which has been plotted by Marchionne since he arrived at the helm in 2004. Last month the struggling Auto Division ended a run of 27 quarterly losses to post a 21 million euro trading profit, comfortably beating most analysts predictions. Fiat Auto also started the year very strongly in its domestic market, climbing above the 30 pct sales barrier last month. The Group also significantly reduced its debt levels. In a clear sign that Fiat is returning to market favour Fitch and Moody's Investor Services, both recently raised their outlook for the Group to 'stable' (from 'negative'). Meanwhile Standard & Poor's rate Fiat as BB-.

Fiat Group shares were virtually unchanged in trading this morning on the Milan bourse. After opening at 8.22 euros a share they climbed slightly to 8.27 euros, just below their year's peak of 8.63 euros reached last month.