June 4, 2020 / 4:59 PM / a month ago

UPDATE 1-FCA to face checks, sanctions on state-backed loan

(Adds comments from minister, Intesa CEO, details)

ROME, June 4 (Reuters) - Fiat Chrysler will file regular reports on its use of a multi-billion euro state-backed loan which Italy is set to approve soon and will face sanctions if it does not respect commitments attached to the package, the economy minister said.

FCA has requested state guarantees, under Rome’s emergency liquidity measures to help companies weather the economic crisis triggered by the pandemic, on a 6.3 billion euro ($7.1 billion) loan for its Italian unit that will be funded by Intesa Sanpaolo .

A government official with knowledge of the matter told Reuters on Thursday the Treasury would clear the state guarantees covering 80% of the loan “in the next few days.”

The loan has stirred controversy in Italy because FCA is working to merge with French rival PSA after moving its legal headquarters to the Netherlands in recent years.

Economy Minister Roberto Gualtieri told a parliamentary committee the approval would hinge on a set of conditions such as paying suppliers that are crucial for Italian plants or financing domestic investments, in particular for electric vehicles.

“There must be a significant impact in terms of employment, investments and innovation,” Gualtieri said.

He pointed out that once approved, the loan will require the FCA to regularly report on the use of the funds, adding that penalties for the group could entail even repaying the loan in full ahead of maturity.

It is unclear whether Italy may also set conditions on FCA’s planned 5.5 billion euro extraordinary dividend which is a key element in the merger with PSA.

Italian politicians have called the dividend into question although the payout should not be incompatible with state aid because it is not due until 2021 and would be made by FCA Italy’s Dutch parent company Fiat Chrysler Automobiles NV.

On Thursday, Intesa boss Carlo Messina defended the loan saying it was essential for the Italian economy. ($1 = 0.8839 euros) (Reporting by Giuseppe Fonte and Valentina Za)

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