Report: Chrysler May Repay Government Loans Next Week

Chrysler has been making leaps and bounds to recover itself after its 2009 bankruptcy filing. Now, according to Automotive News, through a set of bond loans, a term loan, and cash from parent company Fiat, the automaker is set to repay itsroughly $7.5 billion in loans back to the U.S. and Canadian governments next Tuesday, May 24.
Last month, Chrysler executives announced that they were going on a road show to secure loan funding in order to meet their goal of paying off the government loans by the end of June. They seem to be ahead of schedule securing $3.5 billion on bond loans, $2.5 billion in a term loan, and $1.3 billion in cash from Fiat. Those loans will help to clear up the majority of Chrysler’s debt, but it will still owe another $2 billion to the U.S. government. Much of that outstanding debt could be repaid once the government decides to sell off its 8.6-percent stake in the company, presumably once Chrysler issues an initial public stock offering.
Refinancing the 2009 government loans with private investors will help Chrysler to reduce its interest payments, which rang in at approximately $1.2 billion last year. Initially, executives hoped to secure the majority of this funding by means of a term loan to keep interest rates low, but questions pertaining to the company’s fiscal and business outlook reduced demand for such a large term loan, and prompted Chrysler to increase its bond offering by $1 billion.
This loan repayment will allow Fiat to up its ownership stake from 30 percent to 46 percent; the only remaining qualification Fiat needs to take majority ownership of Chrysler is to build a Fiat-branded car in the U.S. that achieves at least 40 mpg. The specific details of the loans and the full repayment plan will be presented later this week — or whenever Chrysler does begin repaying its federal loans.
Source: Automotive News (Subscription required)


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