US: Chrysler soon to repay government loans
Chrysler Group has priced its previously announced offering of new secured senior debt securities (notes) and credit facilities which will help it pay off US and Canadian government loans.
The notes will be issued in two tranches: US$1.5bn principal amount of 8% secured senior notes due 2019 and $1.7bn principal amount of 8-1/4% secured senior notes due 2021.
Chrysler has also arrangd a new credit facility including a $3bn term loan facility and a $1.3bn undrawn revolving credit facility permitting it to borrow funds at 4.75% over LIBOR, subject to a LIBOR floor of 1.25% on the term loan facility.
Chrysler Group intends to use these proceeds and those from the recently announced exercise by Fiat of an option to acquire an incremental ownership to repay its loans from the US and Canadian governments. The notes offering, the senior secured credit facility and the Fiat equity investment are all expected to close on 24 May, 2011.
"Paying off government loans is a significant milestone for Chrysler and delivers on a promise it made. With the loans being paid off with lower-interest loans, Chrysler will save money, which should show up on its bottom line," said Edmunds.com senior analyst Michelle Krebs.
"Site traffic shows that Chrysler has regained the interest of consumers but it still faces challenges with improving product quality and introducing compelling new models. In particular, Chrysler needs more smaller fuel-efficient vehicles beyond the Fiat 500."