A Chrysler 300 is due to the stage during the day of the press for the show's North American International Auto in Detroit, Michigan, on January 10, 2011.
Credit: Reuters/Rebecca CookBy deepa seetharamanDETROIT | Thu 10: 49 am EDT on April 28, 2011
DETROIT (Reuters) - Chrysler Group LLC, who came to the brink of collapse before a federal bailout in 2009, plans to pay absolutely more than 7 million dollars in loans to the Governments of United States and Canada at the end of June.
Announcement of the company on Thursday comes almost two years after Chrysler emerged from a U.S. bankruptcy funded under the direction of the Italian automaker Fiat SpA. (FIA).(MY)
The Thursday announcement produces the same day as the Secretary of the Treasury Timothy Geithner is scheduled to make a trip in Detroit and meet with Sergio Marchionne, CEO of Fiat and Chrysler.
Proceeds from loans term and debt sold to institutional investors will be used for the reimbursement to the Governments, Chrysler said in a statement. Chrysler aims to give back to Governments and to pay related fees and expenses in the second quarter.
Fiat will also exercise an option to buy 16 percent of Chrysler of $ 1.27 million during the quarter. Chrysler said to use that money to repay the loans.
The debt offering loan term and the infusion of cash from Fiat expected that they are, said the company.
Pay loans from Governments of United States and Canada could mark a step critical to Chrysler as the manufacturer tries to distance himself from the controversial rescue by the administration of Obama and rebuild the confidence of consumers in the brand.
It will also allow Chrysler to abandon high interest rates on loans and get more strong financial standing before an initial public offering of this year or the next.
Last year, Chrysler paid more than $ 1.2 million in interest, or more than 3 million dollars a day.
"It's a step very smart on the part of Marchionne," said Dennis Virag, President of the automotive Consulting Group Inc., "what you are doing is to convert high-cost debt to lower cost debt and he is providing funding for the development of future products to finally take the public corporation".
Marchionne is pushing Chrysler to get up to $ 500 million net income this year. The company reports first quarter results on May 2.
The debt securities will be sold in a private offering exempt from registration under the law of values of United States in 1933, Chrysler said in a statement.
The nominal value of Chrysler debt is approximately $ 7.5 million.
HISTORY OF GIRO
Refinancing also represents an important milestone for the administration of Obama, who face a review of its highly unpopular decision to save the small and weak of three automakers in Detroit's collapse.
Geithner and Marchionne will tour assembly plant North Jefferson of Chrysler, where the company builds its lauded Jeep Grand Cherokee.
Marchionne, who divides his time between Italy and the United States, has been credited with reviving the interest of investors in Chrysler, a car manufacturer that was left for dead only two years ago.
The company has submitted 16 vehicles new and renewed, including the Grand Cherokee and the Chrysler 300. The company has also built some buzz renovated to its main brand with a Super Bowl advertisement and slogan "Imported of Detroit".
Virag noted that Chrysler has also dropped its point of balance and new products and more attractive in the pipeline.
"Is headed in the right direction, all they need is time," Virag, said. "This gives time."
The U.S. automaker not to disclose figures, but people familiar with the matter said Chrysler plans to raise 6 million dollars in loans and bonds to pay off the debt of the Government.
Chrysler has also invited banks to begin due diligence on the company and its credit on Thursday, ahead of the official launch of the refinancing of the package next week, said the sources.
Chrysler executives will begin to potential investors of debt, mainly in North America, as part of a road show next month.
Morgan Stanley (MS)(N) will lead the loan's term, Bank of America (BAC) agreement(N) the amount of bonuses and Citigroup (Constitution) the line of credit, said people familiar with the matter. Goldman Sachs (GS)(N) is Advisor on global refinancing efforts of Chrysler.
FIAT-CHRYSLER
In the past two years, Chrysler and Fiat have been approaching operationally.
Approximately half of your supply chain is shared. Parts and service of Chrysler Mopar Division is the sale of parts made of Fiat. Marchionne has said that the company can build a SUV of Maserati on the same platform that Chrysler is used to create the Grand Cherokee.
As part of the rescue operation, Fiat took control of administration of Chrysler and an initial set of 20 percent. Fiat was given a series of tests and an option to increase its participation in Chrysler to 51 percent.
But Fiat can only take control of the majority if Chrysler repays the loans of Government as a whole. Marchionne wants to get to 51% at the end of the year.
The refinancing agreement paves the way for Fiat to take a majority stake in Chrysler, which analysts and bankers said that it would make the automaker's U.S. more attractive to potential investors of shares.
The Chief Executive of Exor SpA (EXOR).(My) said Thursday that the company will remain a major shareholder in Fiat even when Fiat took control of most of Chrysler.
(Reporting by Deepa Seetharaman, editing by Gerald e. McCormick, Dave Zimmerman and matthew Lewis)
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