Chrysler repays $7.6 billion in outstanding U.S., Canadian loansTue, 24 May 2011 00:00:00 -0700
Chrysler on Tuesday repaid $7.6 billion in loans to the U.S. and Canadian governments, nearly two years after the No. 3 automaker was rescued.
The company said it made a payment of $5.9 billion to the U.S. Treasury and $1.7 billion to Export Development Canada--retiring loans that allowed Chrysler to exit bankruptcy in June 2009. Chrysler completed repayment of the loans six years ahead of schedule.
"Less than two years ago, we made a commitment to repay the U.S. and Canadian taxpayers in full and today we made good on that promise," CEO Sergio Marchionne said in a statement. "The loans gave us a rare second chance to demonstrate what the people of this company can deliver and we owe a debt of gratitude to those whose intervention allowed Chrysler to re-establish itself as a strong and viable carmaker."
With Tuesday's transaction, the U.S. government's stake in Chrysler has been reduced to 6.6 percent from 8.6 percent, and Canada's interest has been cut to 1.7 percent from 2.2 percent, a company spokesperson said.
Fiat SpA now owns a 46 percent stake, up from 30 percent, and a United Auto Workers trust owns 45.7 percent, down from 59.2 percent.
Chrysler's fortunes have been boosted by improved sales as it rolls out 16 new or refreshed models this year. In the first quarter, the company reported a net profit for the first time since exiting bankruptcy under the control of Italy's Fiat SpA.
The automaker borrowed $5.1 billion from the United States and $1.6 billion from Canada in June 2009.
Chrysler said it has paid $6.5 billion in total to the U.S. government, and $2 billion in total to EDC. The amounts include $1.8 billion in interest.
Last week Chrysler secured new financing that allowed it to pay off the loans. The financing package includes a loan of $3 billion, debt securities totaling $3.2 billion and a revolving credit line of $1.3 billion.
The new financing will save Chrysler an estimated $350 million a year in interest expenses.
As a result of the loan repayments, Fiat's stake in Chrysler will rise to 46 percent as of Tuesday.
Fiat is now within striking distance of its goal to own 51 percent of Chrysler in 2011. Once Chrysler develops a vehicle that gets 40 miles per gallon on a Fiat platform--a development expected in the fourth quarter--Fiat can go to 51 percent.
Fiat has options to increase its Chrysler stake to more than 70 percent, Chrysler said this month in a filing with the U.S. Securities and Exchange Commission. Those options include the right to buy the U.S. Treasury's remaining stake in the 12 months after it repays the government.
Fiat also has an option to acquire 40 percent of the original stake held by a UAW retiree health-care trust, Chrysler said. The option is exercisable from July 1, 2012, to Dec. 31, 2016, and in amounts of as much as 8 percent in any six-month period, according to the filing.
By Bradford Wernle and David Phillips- Automotive News