By Natalie Wright and Caleb Frazier
NEW YORK, June 12 Chrysler Group LLC
set terms on a loan refinancing that will clear the way for
Italy's Fiat to buy the rest of the U.S. carmaker that
it does not already own.
The company is looking to cut the interest cost on its
existing $3 billion term loan B by $52 million to $60 million
per year. Under the proposal, Chrysler aims to cut pricing to
LIB+300-325, with a 1 percent Libor floor from LIB+475 with a
1.25 percent floor, banking sources told Thomson Reuters LPC.
The new loan is expected to carry 101 soft call protection
for six months. The maturity is expected to be unchanged, at May
Citi is leading the new refinancing transaction, along with
Morgan Stanley, Bank of America Merrill Lynch, and Goldman
Sachs. Lender commitments are due at 5 p.m. June 18. Closing is
expected on June 21.
As previously reported, Chrysler's loan refinancing is the
second part of a three-stage process that also includes a 1.95
billion ($2.6 billion) euro refinancing of Fiat's existing debt
and a possible M&A financing backing Fiat's possible bid for the
remainder of Chrysler.
Fiat owns 58.5 percent of Chrysler and is trying to buy the
remaining 41.5 percent that it does not already own and merge
the two manufacturers into the world's seventh-largest auto
group by sales.
Fiat and Chrysler's loans were expected to be refinanced
before the summer to take advantage of strong loan market
conditions to cut borrowing costs and build in the flexibility
to allow a potential acquisition to go ahead.
Sergio Marchionne, Chairman and CEO of the Chrysler Group
LLC and the CEO of Fiat S.p.A, already leads combined management
teams for both companies.
Chrysler also plans to amend the restricted payments clause
in its existing credit agreement to include a 50 percent
consolidated net income builder basket, to match the second-lien
notes. The company is also seeking amendments to certain
definitions and negative covenant provisions.
Moody's Investors Service upgraded Chrysler from B2 to B1 in
February 2013, given Moody's view that the company can sustain
progress made in the previous 18 months to strengthen its
competitive position in North America.
Corporate family ratings are B1/B+, while facility ratings
In May 2011, Chrysler Group LLC announced the repayment of
$7.6 billion in outstanding U.S. and Canadian government loans
following the completion of a new refinancing package.
The financing consisted of a $3 billion tranche B term loan,
$3.2 billion in notes, and a $1.3 billion revolver. The term
loan was issued at a spread of LIB+475 with a 1.25 percent Libor
floor and a 99 original issue discount. The term loan matures in
May 2017, and priced with call protection of 102 in year one,
then dropping to 101 in June of this year.
The revolver was undrawn as of March 31.
Chrysler Group LLC was formed in 2009 to establish a global
strategic alliance with Fiat S.p.A. Chrysler is the maker of
Jeep, Dodge, Ram, Mopar, SRT and Fiat vehicles and products.