Fiat in talks with banks to strengthen its balance sheet

Article by Anita Panait, on February 14, 2013

Fiat S.p.A. is holding talks with banks over financing options with an aim to boost its balance sheet in preparation for its bid to acquire the stake in Chrysler Group LLC stake it doesn't yet own, three sources told Bloomberg News. They also said that Sergio Marchionne, chief executive of both Fiat and Chrysler, has held discussions with banks to help pay for a part of the 41.5-percent stake currently owned by the Voluntary Employees' Beneficiary Association (VEBA), a medical benefits trust for retired UAW members.

The sources noted that a final deal may take months to materialize since Fiat and the VEBA do not agree over the value of the shares. Marchionne is assessing financing options that entail a bridge loan to complete the deal, two of the sources told Bloomberg News. According to an estimate by Goldman Sachs Group Inc., Fiat could pay around EUR2.23 billion ($2.98 billion) to acquire the remaining stake. Goldman Sachs expects a possible deal within 12 months.

Marchionne is banking on Chrysler to keep its earnings pace while he works to stop Fiat from further bleeding financially in Europe by 2015 at the earliest. The Italian carmaker would have posted EUR1.04 billion in losses in 2012 if not for Chrysler. Fiat has been looking forward to acquire the remaining stake in Chrysler to gain access to its cash and pave the way for a possible merger.

Max Warburton, an analyst at Bernstein Research, told Bloomberg News that the deal remains inevitable, as this will allow Fiat and Chrysler to pool cash in due course. He added that the deal will allow the carmakers to ensure that Chrysler's cash generation can support Fiat.

Two of the sources said that banks are urging Fiat to raise capital to strengthen its balance sheet, keep debt under control and sustain cash as it acquires the rest of Chrysler. Fiat may need to increase its capital by around EUR1.5 billion, one of the sources. Fiat, however, has no plans to sell a stake in Ferrari just to finance the deal, one person said.

Topics: fiat

If you liked the article, share on:

Pin It

Comments

Recommended

It’s quite safe to say that this generation marks the rise of the electric cars. For the past few years, automakers have been very busy trying to find the perfect...
by - March 28, 2017
Want to go for a sportier look, but don’t have enough cash to burn? Good news for future Ford Edge buyers, as the 2018 model year will have an optional...
by - March 28, 2017
Audi refreshes its portfolio as its go-faster division officially announces the release of six new RS models by the end of 2018. That’s quite a huge number of cars to...
by - March 28, 2017
Has Toyota started the production of a new electric supercharger? Well, a patent that was recently published indicated that they might have. And this electric supercharger looks more durable and...
by - March 27, 2017
The Tesla Model S has finally arrived in South Korean soil and is now available for test drive. But, there’s a catch. You’ll have to wait several months if you...
by - March 27, 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