Chrysler To Pay Back U.S Government Loans

Chrysler To Pay Back U.S Government Loans

The Chrysler Group LLC is expected to announce today that it has reached a deal to refinance its debt.

The Auburn Hills based company plans to repay $7.5 billion in government loans to both the U.S and Canadian governments by May 24th. Chrysler owes $5.9 billion to the U.S and $1.6 billion to Canada. Chrysler’s partner Fiat SpA is to increase its share in the struggling automaker to 46 percent, reducing both the American and Canadian government’s share of Chrysler.

Fiat will pay Chrysler $1.3 billion in cash to repay the loans and increase its share by additional 16 percent. Chrysler will use $3.5 billion in bonds, a $2.5 billion term loan as well as Fiat paying the $1.3 billion in cash. The loan payoff comes far ahead of what was required. Chrysler had until 2017 to repay its debts in full. With this financial move, Chrysler hopes to offer public stock likely later this year or the next based on market conditions and the wishes of its shareholders.

With Fiat’s help, Chrysler has revamped its product lineup, redesigned its vehicles fetching higher prices and in the first quarter has reported its first net profit of $116 million. Chrysler and Fiat CEO Sergio Marchionne said Chrysler is on track for a net revenue of $55 billion in 2011, a $2 billion operating profit and net profit of $200 to $500 million.

[Source: Detroit News]