Chrysler says it will repay U.S. rescue loans by midyear

via onlineautobrochure.com

Chrysler Group has reached a debt-refinancing deal that will allow the automaker to repay $6.6 billion in bailout loans from the U.S. and Canadian governments this quarter.

Proceeds from a term loan and debt securities sold to institutional investors will be used to repay the debts to the governments, Chrysler said in a statement today. Chrysler made the announcement ahead of a planned visit to Detroit later today by U.S. Treasury Secretary Timothy Geithner.

Repaying the loans from the U.S. and Canadian governments would mark a critical step for Chrysler as it tries to distance itself from the controversial 2009 rescue by the Obama administration and rebuild consumer confidence in the brand.

Chrysler also hopes the deal will ease Department of Energy concerns about the automaker and allow the federal agency to grant the company as much as $3.5 billion in low-interest loans. The money would be used to refit Chrysler plants to build more fuel-efficient vehicles — a priority of President Obama’s.

Further details will likely be disclosed on Monday when first-quarter earnings are reported, the automaker said.

The announcement comes almost two years after Chrysler emerged from a U.S.-funded bankruptcy under the management of Italy’s Fiat S.p.A.

Fiat announced earlier that it plans to buy an additional 16 percent stake in Chrysler for $1.27 billion, up from the current 30 percent. The debt offering, term loans and the cash infusion from Fiat are all expected to occur concurrently, the company said.

Analysts and bankers have said this would make the U.S. automaker a more attractive story for potential investors in an initial public offering that could come as early as this year. Next month, Chrysler executives will begin to court potential debt investors, primarily in North America, as part of a road show. Continue reading here.