Chrysler to restructure its proposed refinancing package

Article by Christian A., on May 16, 2011

Chrysler Group LLC may be restructuring its proposed refinancing plan this week after investors displayed doubts over the loan part of the transaction, people who are familiar with the deal disclosed. The company is currently searching for ways to obtain $6 billion in new debt in order to repay government loans.

Since early March, the company’s executives led by Chief Executive Officer Sergio Marchionne have been meeting with potential investors in order to market $2.5 billion of second-lien bonds and a $3.5 billion term loan. The executive team is aiming to complete the loan transaction by May 18.

However, the company may reduce the size of the term loan, as potential investors have been slow to commit after weighing the business prospects of the company and the large size of the facility, according to insiders. The company has been trying to sell one of the largest corporate loans since the financial crisis.

This month, the limits of the loan market have also been tested by the appearance of a variety of other huge leveraged transactions, including a multi-billion dollar agreement with Delphi Automotive.

In addition, the timing of Chrysler’s deal has been complicated further by the process of getting approval from Fiat and the governments of U.S. and Canada, the Wall Street Journal reported last Sunday citing people who are familiar with the situation.

Due to the hesitation of investors, the bank loan part of the company’s refinancing plan is likely to have an interest rate of 5.75 percent, higher than the currently proposed 5.5 percent, the sources added.

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