MILAN (Reuters) - Italian carmaker Fiat FIA.MI has renewed a three-year, 2 billion-euro ($2.64 billion) revolving credit line, it said on Friday, a vital step in its plan to acquire the Chrysler shares it does not already own.
The loan agreement with nine banks refinances a 1.95 billion euro loan of the same duration that was signed in July 2011, the company said in a statement.
“The operations shows the strong support for the Fiat group from its key banks,” it said.
Fiat owns 58.5 percent of U.S. peer Chrysler and is trying to buy the remaining shares to merge the two companies and create the world’s number seven carmaker by sales.
Fiat’s loan refinancing is one step in a three-phase refinancing plan that includes the re-negotiation of Chrysler’s $3 billion loan and financing for the acquisition of Chrysler’s shares.
The refinancing are designed to cut borrowing terms and adjust the covenant terms of both loans to allow the merger to go ahead.
Chrysler completed its $3 billion loan refinancing on Thursday, when the loan went free to trade in New York. The share purchase deal is on a longer post-summer timetable, bankers said.
Fiat’s 2 billion euro loan refinancing will be launched to a second group of relationship banks shortly in a wider plan to reduce the nine lead banks’ exposure, a senior banker said.
The nine banks that have already joined the deal are Barclays, BNP Paribas, Citigroup, Credit Agricole CIB, Intesa San Paolo, Mediobanca, Royal Bank of Scotland, Societe Generale and UniCredit.
Each of them committed around 222 million euros to the loan which they are aiming to cut to around 150 million euros each with the syndication, the senior banker said.
Banks joining in the wider syndication are being offered fees of 90 basis points for commitments of 100 million euros and 75bps for commitments of 50 million euros, he added.
Pricing of the deal is tied to a ratings grid and ranges from 450 basis points (bps) to 150bps if the company attains an investment-grade rating, a senior banker said.
Fiat is rated BB- by Standard and Poor’s and Ba3 by Moody‘s. ($1 = 0.7590 euros)
Reporting by Danilo Masoni and Tessa Walsh, editing by Stephen Jewkes and Elaine Hardcastle