Chrysler Group has
announced today that it will refinance its US$7.53
billion loan from the U.S. and Canadian governments
paving the way for Fiat to take its stake in the U.S.
carmaker up to 46 percent, allow it to home in on a
controlling 51 percent shareholding and clearing the
path towards a Chrysler Group IPO and eventually a
future merger between the two carmakers.
The financing will be
raised through a term loan and debt securities with the
four banks that will lead the consortium - Morgan
Stanley, Bank of America, Citygroup and Goldman Sachs -
set to meet today to set the ball rolling.
Currently Chrysler
Group is paying up to 14 percent interest on the U.S.
Treasury loans and up to 20 percent on the Canadian
government ones. Fiat and Chrysler Group CEO Sergio
Marchionne previously landed himself in hot water by
describing them as "shyster" loans. Refinancing the
loans will result in annual costs savings to Chrysler
Group of around US$250 million.
Paying back the
government loans is the key requirement of Fiat being
able to take a controlling 51 percent stake in Chrysler
Group. Fiat has just secured the fixed price on the call
option to take an additional 16 percent stake in
Chrysler Group at US$1.27. That will take its holding up
to 46 percent, with a final 5 percent stake to hand the
Italian carmaker a controlling share set to be triggered
before the end of the year.
A statement issued in
Michigan today read: "Chrysler Group LLC announced today
that it intends, subject to market and other conditions,
to repay in full the outstanding obligations under the
loans provided to Chrysler Group by the U.S. Department
of the Treasury and the Canadian federal and Ontario
governments. Chrysler Group intends to complete the
repayment during the second quarter of 2011 from
proceeds of a new term loan facility and newly issued
debt securities to be offered and sold to institutional
investors in a private offering exempt from registration
under the U.S. Securities Act of 1933. Chrysler Group
intends to use the net proceeds of the term loan and the
offering, together with the proceeds from the recently
announced exercise by Fiat of an option to acquire an
incremental ownership interest in Chrysler Group, to
repay its loans from the U.S. and Canadian governments
in full and to pay related fees and expenses. The
completion of the offering, the credit facilities and
the equity investment by Fiat under its call option are
expected to occur concurrently."
