Sources said Chrysler Group LLC set pricing guidance on a $2 billion term loan as part of a $4.7 billion refinancing of the company’s VEBA Trust note.
The JP Morgan-led loan is split between a $250 million incremental term loan B that will be combined with the company’s existing term loan B due May 2017, and a new $1.75 billion term loan B maturing in December 2018. The loans are expected to price at LIB+275, with a 75bp Libor floor. Original Issue Discounts (OID) are 99.75 on the incremental term loan B and 99.5 on the new loan maturing in 2018.
A bank meeting is set for 1 p.m. ET on Thursday to launch the credit facility that refinances the VEBA note, which was part of the company’s settlement with the United Auto Workers Union (UAW). The package also includes up to $2.7 billion in senior debt securities. The refinancing follows the completion of Fiat S.p.A.’s acquisition of Chrysler. Last week, Fiat bought from the VEBA Trust the remaining 41.5 % stake in the US automaker that it did not already own.
The Voluntary Employees Beneficiary Association Trust note, also known as the VEBA Trust note, was issued by the automaker as part of a settlement agreement with the UAW in June 2009. The senior unsecured note had a face value of $4.587 billion. The note was slated to back the medical costs of Chrysler’s union-member retirees.
Fiat’s acquisition of the U.S. automaker, finalized on January 21, consisted of a special distribution paid by Chrysler Group of $1.9 billion, and a cash payment by Fiat North America LLC to the VEBA Trust of $1.75 billion. Chrysler Group funded the special distribution from available cash on hand. Fiat also funded its $1.75 billion payment from available cash.