Fiat may launch convertible bond to boost liquidity

Article by Anita Panait, on January 14, 2014

Fiat Group could launch a convertible bond to improve its liquidity following its agreement to acquire the rest of Chrysler Group for $4.35 billion from a UAW retiree healthcare trust, Fiat-Chrysler chief executive Sergio Marchionne told La Repubblica. He also said that once Fiat merges with Chrysler, the Italian carmaker will focus on its European strategy on revamping its Alfa Romeo brand and will keep its production in Italy as it bids to boost its European business and keep jobs, Marchionne told the paper.

According to Marchionne, a mandatory convertible bond could be an "appropriate measure" to fund investments following the agreement that entails Fiat paying $1.75 billion in cash while Chrysler will pay the rest.

Marchionne told the paper Fiat did not need a capital increase to finance the deal, which is expected to be closed on or around Jan. 20. Marchionne, however, did not comment on a potential EUR1.5 billion ($2.04 billion) size for the bond as reported in media reports.

Likewise, Fiat has had its Ba3 rating placed under review by Moody's credit ratings agency for a possible downgrade reflecting the effect of the planned Chrysler takeover on its cash position. According to Moody’s, the takeover will weaken Fiat's liquidity position at a time when the Italian company is still free cash flow negative.

Topics: fiat

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