Chrysler plans to repay U.S. and Canadian government loans next week

Article by Christian A., on May 19, 2011

Chrysler intends to repay the debt it owe to the Canadian and U.S. and Canadian governments on May 24, allowing Fiat S.p.A. to increase its ownership in Chrysler by 16 percent, two people who are familiar with the scenario said.

The company has been marketing as much as $7.5 billion of debt in order to repay the U.S. and Canadian governments for loans that were obtained as part of its bankruptcy restructuring in 2009.

Last month, the company has announced that it will repay the loans to give way for Fiat to exercise an option to raise its share from 30 percent to 46.

According to one of the people familiar with the case but asked for anonymity due to the confidentiality of the matter, the new debt is expected to price Friday, and three business days are scheduled to finalize the details before the money switches hands.

Chrysler spokeswoman Eileen Wunderlich declined to comment. Insiders have previously disclosed that Chrysler is seeking a $2.5 billion term loan, a $3.5 billion bond offering and a $1.5 billion line of credit.

Italy-based Fiat will start negotiations with banks to increase its credit line to as high as 1.5 billion euros ($2.14 billion) after raising its share in Chrysler, according to three people familiar with the situation.

The company said that it will be paying $1.27 billion to acquire the 16 percent more in Chrysler. Sergio Marchionne, CEO of both Fiat and Chrysler, stated he wants to increase Fiat's share in Chrysler to 51 percent this 2011 in preparation of bringing the U.S. company to public.

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