said Thursday it has put together a $7.8 billion refinancing package that should enable it to pay off its loans from the U.S. and Canadian governments.
The automaker said Thursday evening that it plans to issue $3.5 billion worth of bonds. Chrysler has also secured a $3 billion term-loan facility and a $1.3 billion revolving credit facility that lets it borrow funds at 4.75% over LIBOR.
Together with Fiat's exercise of an option to acquire more ownership in Chrysler, the third member of the Detroit Three will be able to repay $7.5 billion in government loans -- $5.9 billion from the U.S. and $1.6 billion from Canada.
expects to increase its share in Chrysler to 46%, on its way to owning 51% by the end of the year.
Currently the United Auto Workers health care trust holds 59.2% of Chrysler, while Fiat has 30%, the U.S. Treasury has 8.6% and the Canadian government has 2.2%. At the end of the year, Fiat would have 51%, the UAW health care trust fund would have 41.5%, the U.S. Treasury would have 6% and Canada would have 1.5%.
Standard & Poor's said earlier Thursday that it could upgrade its ratings on Chrysler debt if the refinancing deal is completed. Regarding the first-lien term loan, the rating will likely be upgraded to BB from BB minus and the recovery rating will likely be upgraded to a one from a two, S&P said.
Regarding the second-lien bond offering, the rating will likely be upgraded to B from B minus and the recovery rating would be upgraded to five from six, the lowest possible, S&P said.
Early this month, Moody's assigned a Ba2 rating to the first lien loan and a B2 rating to the second lien bonds and said the outlook for Chrysler is positive. Moody's analyst Bruce Clark wrote that "Chrysler's strategic alliance with Fiat will enable the company to effectively address its most pressing challenges and to generate operating performance and credit metrics that are solidly supportive of the B2 rating."
Clark said Chrysler's key challenge has been uncompetitive vehicles in North Carolina, which resulted in a 2010 net loss of $652 million, at a time when
generated combined net income of $4 billion excluding items.
But "with the assistance of Fiat, 16 of Chrysler's vehicles
representing approximately 74% of the company's US volume have been renewed or significantly refreshed during late 2010 and early 2011," Clark wrote. "Initial sales data and quality measures indicate that these vehicles have the potential to materially strengthen Chrysler's US portfolio," while continued cooperation with Fiat could also benefit Chrysler in purchasing, product development, platform sharing and international distribution.
-- Written by Ted Reed in Charlotte, N.C.
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