Fiat access to Chrysler cash limited by dividend cap and debt covenants

Article by Anita Panait, on February 19, 2014

Fiat Chrysler Automobiles group disclosed that its access to Chrysler’s cash was limited by a cap on dividends from the US carmaker and its debt covenants. Fiat’s intention to fully acquire Chrysler was partly motivated by the fact that it could gain access to the US carmaker’s finances for it to spend on new models to overhaul its loss-making operations in Europe.

Analysts are worried about Fiat's increasing debts and its ability to finance a strategy that will allow it to focus on its upscale Maserati and Alfa Romeo brands and stop fully relying on low-margin volume models.

In response to a request for clarification from market regulator Consob, Fiat said in a statement that beyond the cap, dividend payments were also subject to the condition that Chrysler's liquidity surpasses a threshold of $3 billion. Fiat said that Chrysler's liquidity was $14.7 billion at the end of 2013.

The Italian carmaker remarked that intercompany financing was limited by debt covenants that require deals to get approval from a majority of "disinterested" members of the Chrysler board of directors. Fiat, however, said it had enough cash to fund its activities.

"On the basis of the group's available liquidity, credit lines in place and available for investment in industrial activities, in addition to the ability to access capital markets ... the group believes that its capital resources are more than adequate to meet the projected funding requirements," Fiat said in a statement.

Moody’s has recently downgraded Fiat’s rating, but the carmaker believes that the event would only prompt a marginal rise in commitment fees on EUR2.1 billion ($2.87 billion) of revolving credit line. [source: Reuters]

If you liked the article, share on:

Comments

Recommended

An RHD (right hand drive) BMW M4 DTM Champion Edition has been listed to be for sale by Romans International, UK’s leading supercar dealership. The first owner of this rare...
by - May 24, 2017
Audi will be offering something exciting for its United Kingdom market. The company announced that it will be adding new features as standard to the A4 range. It also confirmed...
by - May 24, 2017
You guys are probably aware of the collaboration between Mercedes-Benz and Renault-Nissan. Knowing this, you would expect that both companies will come up with something impressive. Sources say that the...
by - May 24, 2017
Amongst all sports cars on the planet, which one is the world’s best-selling model? Would you have guessed that it is the Ford Mustang? According to IHS Markit’s global automotive...
by - May 24, 2017
It’s not a bird. It’s not a plane. It’s Kris Singh’s blue carbon flying machine! Time stood still for a few minutes after the extremely rare Pagani Huayra BC Macchina...
by - May 24, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries