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Chrysler Proposes Rates For Repay $3.5B U.S., Canada Bailout

May 7, 2011
2 min to read


Chrysler Group LLC, the automaker operated by Fiat SpA, offered initial rates on a $3.5 billion term loan it's seeking to repay U.S. and Canadian governments, according to four people briefed on the transaction.


The Auburn Hills-based company proposed an interest rate 4 percentage points to 4.25 percentage points more than the London interbank offered rate, said the people, who declined to be identified because the terms are private, reported The Detroit News.

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Libor, a rate banks charge to lend to each other, will have a 1.25 percent floor.


Chrysler is marketing as much as $7.5 billion of debt to repay borrowings for its government-funded bailout as the company plans an initial public offering and works to merge with its Italian partner.


The company plans to raise $2.5 billion in eight- and 10-year bonds and $1.5 billion in a revolving credit line maturing in five years, Chrysler said this week.


Gualberto Ranieri, a spokesman for Chrysler, declined to comment on the transaction.


Chrysler is proposing to issue the six-year term loan at 99 cents to 99.5 cents on the dollar, the people familiar with the talks said, reducing proceeds for the company and boosting the yield for investors.

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Lenders are also offered a one-year soft-call protection of 101 cents, the people said, meaning the company would have to pay 1 cent more than face value to refinance the debt during its first year.


Morgan Stanley is arranging the company's term loan, Bank of America Corp. will manage the bond sale and Citigroup Inc. will lead the revolver, two other people briefed on the matter said last week.


In a revolving credit facility, money can be borrowed again once it's repaid; in a term loan, it can't.


Moody's Investors Service this week rated Chrysler B2, its first-lien senior secured loans Ba2 and the second-lien notes B2. Standard & Poor's rated the issuer B+.

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