28.04.2011 CHRYSLER REFINANCES ITS GOVERNMENT LOANS CLEARING THE WAY FOR THE FIAT TAKEOVER

JEEP COMPASS 2011

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."
 

© 2011 Interfuture Media/Italiaspeed