America’s Department of the Treasury says it has received US$560m in proceeds from the sale of its remaining stake in Chrysler Group to Fiat today (22 July).
With the closing of the transaction, the Treasury has fully exited its investment in Chrysler Group under the Troubled Asset Relief Program (TARP).
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Fiat paid US$500m to the Treasury for its 98,461 shares or 6% fully diluted equity interest in Chrysler Group. Fiat also paid US$60m to the Treasury for its rights under an agreement with the UAW retirement trust pertaining to the trust’s shares in Chrysler Group.
“With today’s closing, the US government has exited its investment in Chrysler at least six years earlier than expected,” said Assistant Secretary for Financial Stability Tim Massad.
“This is a major accomplishment and further evidence of the success of the Administration’s actions to assist the US auto industry, which helped save a million jobs during the worst economic crisis since the Great Depression.”
Fiat held a call option to purchase the Treasury’s equity interest in Chrysler Group. This option was exercisable for the 12 months following repayment of the Treasury loan provided to Chrysler Group.
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By GlobalDataA statement from the US Treasury notes: “On 24 May this year, Chrysler Group repaid US$5.1bn in TARP loans and terminated its ability to draw a remaining US$2.1bn TARP loan commitment. On 27 May, Fiat notified the Treasury of Fiat’s irrevocable commitment to exercise its option to purchase the Treasury’s 6% fully diluted equity interest in Chrysler Group.
“Pursuant to the Call Option Agreement, the price for the 6% fully diluted equity interest in Chrysler Group was determined based on negotiation between Fiat and Treasury.”
The Treasury committed a total of US$12.5bn to Old Chrysler and Chrysler Group under TARP’s Automotive Industry Financing Program (AIFP). With the closing of today’s transaction and Chrysler Group’s repayment in full of its TARP loans in May, more than US$11.2bn of that amount has been returned to taxpayers through principal repayments, interest, and cancelled commitments.
The Treasury is unlikely to fully recover the difference of US$1.3bn owed by Old Chrysler.
It has the right to recover proceeds from the disposition of the liquidation trust associated with the bankruptcy of Old Chrysler, but does not expect a material recovery from those assets.
