Chrysler Group LLC, the U.S. automaker controlled by Italy’s Fiat SpA, is seeking to lower the rate on a $2.93 billion term loan, according to a person with knowledge of the transaction.
Morgan Stanley, Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. are arranging the financing and will hold a call for lenders on Dec. 9 said the person, who asked not to be identified because the deal is private.
Chrysler currently pays interest at 3.25 percentage points more than the London interbank offered rate with a 1 % minimum on the lending benchmark. The credit agreement provided lenders with six months of call protection at 101 cents, meaning Chrysler would have had to pay 1 cent more than face value if it repriced the debt during the six months after the deal closed.
“It’s very much a borrower’s market and a lot of deals are oversubscribed,” Robert Blank, head of leveraged-loan research at Xtract Research LLC, said in a telephone interview. “Very often lenders don’t push back as hard as they should. I fear that some borrowers will in fact be able to provide no call protection at all.”
The typical call protection in credit pacts has dropped to one percent for six months from one percent for one year, according to Xtract.
Chrysler obtained the original loan in 2011, when it borrowed bonds and bank debt to repay $7.6 billion from the U.S. and Canadian governments, which provided financing in 2009 to prevent the company’s collapse.