Chrysler to Repay Government Loans Tuesday
Chrysler will completely pay off its U.S. and Canadian government loans — along with any related fees and expenses — with the proceeds from a notes offering, a new term loan facility and the equity investment from Fiat, the company revealed Friday.
The company priced the senior debt securities offering — which had already been announced — late last week, saying it would issue the notes in two tranches. One tranche is a $1.5 billion principal amount of 8-percent Secured Senior Notes due 2019, the other is a $1.7 billion principal amount of 8.25-percent Secured Senior Notes that comes due in 2021.
The new senior secured credit facility that Chrysler said Friday it plans to enter is comprised of a $3 billion term loan facility and a $1.3 billion undrawn revolving credit facility that would allow the automaker to borrow funds at 4.75 percent over LIBOR, subject to a LIBOR floor of 1.25-percent on the term loan facility.
Chrysler said the offering, senior secured credit facility and Fiat equity investment will likely all close Tuesday at the same time.
"Paying off government loans is a significant milestone for Chrysler and delivers on a promise it made,” said Edmunds.com senior analyst Michelle Krebs, offering some perspective. “With the loans being paid off with lower-interest loans, Chrysler will save money, which should show up on its bottom line.”
Krebs went on to note that based on Edmunds.com site traffic, Chrysler appears to be heading in the right direction. However, there are some product-related hurdles remaining.
“Edmunds.com site traffic shows that Chrysler has regained the interest of consumers, but it still faces challenges with improving product quality and introducing compelling new models,” Krebs noted.
“In particular, Chrysler needs more smaller fuel-efficient vehicles beyond the Fiat 500,” she pointed out.