Chrysler Group, wanting to repay government loans used to bail it out two years ago, has increased the bond portion of a US$7bn borrowing plan after investors balked at the largest loan offer since the financial crisis, a media report said.
According to the Wall Street Journal (WSJ), the automaker said it would sell $3.5bn of bonds, up from the original $2.5bn, and reduce the loan component to $2.5bn from $3.5bn. The bond, split between eight- and 10-year maturities, was scheduled to price on Thursday.
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Chrysler, which, the WSJ noted has not said where it would find the last $1bn, is eager to repay its obligations to the US and Canadian governments and is seeking to take advantage of investor appetite for cheap debt.
The paper said Chrysler had encountered some resistance in selling the loan component of the deal, given the loan market is much smaller than it was in 2006-2007 and investors are more eager for high-yielding bonds than loans. Chrysler’s bonds probably will pay interest in the 8% range, compared with the 5% range for the loan.
“The company has come a long way since its restructuring,” Adrian Miller, senior vice president-fixed income strategist at Miller Tabak Roberts Securities in New York, told the WSJ. “The sector itself has momentum and the company is positioned for improved performance going forward.”
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