Chrysler to refinance its $7.5B in government loans image

Chrysler will unveil plans next week to launch a deal to pay back $7.5 billion in government loans, Reuters reported this morning.

If Chrysler can refinance and repay its $7.5 billion in government loans it would clear the way for Fiat to pay $1.27 billion for an additional 16% stake in Chrysler, bringing its share to 46%.

Sergio Marchionne, the chief executive of both Chrysler and Fiat, is expected to announce the debt plan Thursday when he welcomes the Treasury secretary, Timothy F. Geithner, for a tour of the company’s Jeep plant on Detroit’s east side.

Last week, Fiat announced it had reached an agreement with Chrysler and other Chrysler shareholders — including the U.S. Treasury, Canadian governments and the UAW — to buy the additional 16% stake by the end of June, as long as the refinancing is done.

Chrysler’s capital infusion may give the U.S. Department of Energy “additional comfort” about the automaker’s financial structure, Marchionne told analysts last week. He said that he expects that after the Fiat stake increase is completed, Chrysler will be able to make progress and obtain as much as $3.5 billion in low-interest loans.

Also, getting rid of the government debt could boost the automaker in the eyes of consumers.
Treasury spokesman Mark Paustenbach and Chrysler spokeswoman Eileen Wunderlich declined to comment.