Chrysler aims to refinance $7 billion of US and Canadian govt debt

Article by Christian Andrei, on April 11, 2011

Sergio Marchionne, the CEO of both Chrysler and Fiat, said that Chrysler seeks to refinance $7 billion of U.S. and Canadian government debt by June. This gives Fiat the opportunity to take a majority stake in Chrysler, which has ongoing talks with investment banks. Chrysler is controlled by Fiat under the rules of a 2009 bailout.

It would have to pay back some of the company to the government before Fiat takes owmership. When asked if this debt would be refinanced by June, Marchionne responded that it’s possible and that the company can do it.

Marchionne said that Fiat has 25% of Chrysler and that a 30% increase will be announced in Tuesday, at the earliest to boost its holding. He explained that the conditions to take on 16% more (in order to take majority control) will be seen there. Marchionne also revealed that Fiat is likely to make use of its cash to get the 16% more.

He declined to provide a value of how much the added stake will get. Last month, Marchionne said that he sought to increase its Chrysler stake to 51% this year; however, he hinted that that the company public may be pushed into 2012.

Under the bailout deal in 2009, Fiat had the management control and it also received a 20% stake in Chrysler's 2009 bailout deal. Fiat could then raise its stake 35% if it meets three tests designed to put the U.S. automaker on firmer financial footing. There’s an option to buy 16% more. In the first test to come up with a fuel-efficient engine in January, Chrysler passed.

They gave a 25% stake. Chrysler would have to reach international sales and distribution targets. To get through this obstacle, Fiat must sell Chrysler cars and trucks through 90% of its dealerships located in Latin America.

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