Report: Chrysler to pay back U.S., Canadian loans back earlier than expected

Chrysler Group LLC - Auburn Hills Headquarters

Like GM, Chrysler is expecting to repay its US and Canadian government loans before 2013, which would allow Fiat to take a 51% controlling stake in the company.

“It’s one of the options that we’re looking at,” Fiat-Chrysler CEO Sergio Marchionne said Monday. “It’s not required to go public.”

The Italian CEO has said that he will seek to improve the company’s capital structure before the planned IPO, including a refinancing of the US and Canadian loans which carry effective interest rates as high as 20%. The interest payments on these loans have kept the company from posting a net income.

Chrysler owes about $7.46 billion to the two governments, with some of the loans maturing by the end of 2011, and the majority in 2017. Fiat must limit its stake to 35% until 2013, unless the government loans get paid back before hand. Marchionne is unsure whether he wants to exercise the additional 16% option prior to an IPO.

Right now, reducing interest costs and stabilizing finances is more important than increasing Fiat’s stake.
“My option is not going to die tomorrow,” Marchionne said.

– By: Stephen Calogera

Source: Automotive News (Subscription Required)