In order to pave the way for Fiat to reach 51 percent ownership of the Chrysler Group, the Auburn Hills-based automaker announced today that it intends to repay in full the loans provided by the U.S. and Canadian governments back in 2009 ($7.53 billion in total).
The Chrysler Group said it plans to complete the repayment during the second quarter of 2011 (ending in June). The company will use money from a new term loan facility plus a new issue of debt securities that will be sold to institutional investors in a private offering along with proceeds from Fiat’s recent cash infusion to increase its stake in Chrysler.
“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,” reads Chrysler’s press release.
Chrysler owes $5.8 billion to the U.S. Department of the Treasury and $1.7 billion to the Canadian federal and Ontario governments after they bailed out the troubled manufacturer in 2009.
As CEO Sergio Marchionne has announced, Fiat plans to take the majority stake in Chrysler this year and to do so the Italians needs to exercise their option to purchase 16 percent of Chrysler for $1.27 billion, raising Fiat’s position to 46 percent, and then acquire another 5 percent later this year. In order to buy the last 5 percent that will increase its stake to 51 percent, Fiat must produce a 40mpg model in the United States.
By Dan Mihalascu
