September 20, 2020

DealBook: Chrysler Plans $7 Billion Debt Offering

The Chrysler Group plans to sell about $7 billion worth of new debt to repay loans it received from the American and Canadian governments as part of its reorganization, people briefed on the matter told DealBook on Friday.

By repaying the government loans, Chrysler will take a major step toward eventually holding an initial public offering, now expected either late this year or next year.

Chrysler has hired several firms — Goldman Sachs, Morgan Stanley, Citigroup and Bank of America — to lead the sale of new loans and bonds, these people said. The banks are also putting together a revolving credit facility for Chrysler that the company can use for general business purposes.

The debt offering could take place as soon as May, these people said.

The American and Canadian governments lent the money to Chrysler in 2009 to keep the company afloat during its bankruptcy and subsequent sale to Fiat of Italy.

But the high interest rates for the loans, which a Chrysler spokesman previously said ranged from 11 percent to 20 percent, contributed to the auto maker’s $652 million loss last year.

Repaying the government loans will also allow Fiat to raise its stake in the company above its current 30 percent. Under the terms of Fiat’s agreement with the American and Canadian governments, the Italian car maker can raise its stake to 35 percent later this year.

Once Fiat’s stake hits 35 percent, it can then exercise an option to buy an additional 16 percent of Chrysler if the government loans are fully paid off.

That would bring Fiat’s ownership to 51 percent, which the Italian company would prefer before taking Chrysler public.

News of Chrysler’s plans was first reported by Reuters.

Article source: http://feeds.nytimes.com/click.phdo?i=83aa0ccb5b56b9d3e744e17f9c26166d

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