U.S. automaker Chrysler Group LLC borrowed $6.2 billion to refinance highcost government loans stemming from its 2009 bankruptcy restructuring, people familiar with the matter said Thursday.
Chrysler has been in dialogue with Goldman Sachs, Morgan Stanley, Citigroup and Bank of America to put together the package deal, which will ultimately clear the way for Fiat to gain a larger stake in Chrysler.
According to reports, Chrysler raised $3.2 billion in bonds, $3 billion in a term loan and a $1.3 billion revolving credit line. The bonds and the term loan, which total $6.2 billion, coupled with $1.3 billion in cash from Italian automaker Fiat SpA, will be used to repay government debt.
Those loans will help to clear up the majority of Chrysler’s debt, but it will still owe another $2 billion to the U.S. government. Much of that outstanding debt could be repaid once the government decides to sell off its 8.6-percent stake in the company, presumably once Chrysler issues an initial public stock offering.
The government loans carried interest rates as high as 20 percent. The new package includes the eight-year bond with an 8 percent interest rate and the 10-year bond at 8.25 percent. The loan will allow Chrysler to borrow funds at 4.75 percentage points over the London interbank offered rate. The credit revolver is there as a safety net which the automaker hopes not to have to use.
The Italian automaker said it expected to increase its stake to 51 percent before the end of 2011.
Chrysler posted its first post-bankruptcy quarterly net profit on May 2 of $116 million for the first quarter, compared with a net loss of $197 million in the year-ago period.
Chrysler is still hoping to get more than $3 billion in Department of Energy loans for projects that improve fuel efficiency.