Fiat to expand credit line to around 2 billion euros

Article by Christian Andrei, on July 12, 2011

Fiat S.p.A., according to two insider sources, will be expanding a credit line to around 2 billion euros ($2.8 billion) this week. The company’s Chief Executive Officer Sergio Marchionne has been aiming to improve financing flexibility after the company obtained control of Chrysler.

A Fiat spokesman declined to comment on the financing plan of the company, which had liquidity of 13.1 billion euros at the end of March. The company has been boosting its finances in preparation to obtain a major control of Chrysler.

The company has agreed on June 3 to pay $500 million for the 6 percent share of the U.S. government in Chrysler, strengthening its holding to 52 percent. The company is aiming to hold 57 percent by the end of 2011.

Initially, the company was granted a 20 percent share by the U.S. government. By the end of this year, Marchionne expects to obtain an additional 5 percent share in the fourth quarter in exchange for developing a fuel-efficient vehicle for Chrysler.

The loan will replace a 1 billion-euro revolving credit line that will expire in February 2012. According to the insiders, the company has agreed on a new facility with Credit Agricole SA, UniCredit S.p.A., and Intesa Sanpaolo S.p.A., which arranged the existing loan, and six other banks. The company sold 1.5 billion euros of bonds last week.

It sold 1 billion euros in April. Marchionne intends to merge Fiat and Chrysler in order to reduce costs and improve integration. The schedule of the merger is not set yet and it will not be likely to take place this year, according to Marchionne last May 25 in Turin. The company consolidated Chrysler's results beginning May 24, which reflects the rapid integration of the automakers since the manufacturer exited bankruptcy in June 2009.

Topics: fiat

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