Chrysler to repay $7.5 billion to US and Canada for bailout
Loans, bond sale to raise funds
DETROIT — Chrysler will soon repay $7.5 billion in bailout money from the US and Canadian governments, another sign the company is recovering from its near collapse two years ago.
The company will pay back that government debt later this quarter using money from new bank loans and an upcoming bond sale. Chrysler has been negotiating a loan refinancing deal with Morgan Stanley, Goldman Sachs, Citigroup and Bank of America. Details could be disclosed on Monday.
The refinancing would allow Chrysler to repay a big chunk of the bailout from the United States and Canada that helped the company get through bankruptcy in 2009. It would also help the automaker save millions by lowering interest payments and bolster its case for a public stock offering as early as the end this year.
The maker of minivans and Jeeps has come a long way since filing for bankruptcy protection April 30, 2009, when its survival was in doubt. Since then, Chrysler has slashed costs and has begun to see stronger sales for its new vehicles, including the popular Jeep Grand Cherokee SUV.
Chrysler has been trying for about six months to refinance the government loans, which cost it $1.2 billion in interest last year. The loans carry interest rates that average 12 percent, and Chrysler has said it can do much better on the open market.
CEO Sergio Marchionne yesterday said the refinancing will help Chrysler’s bottom line, although he would not say how much the company would save in interest payments.
The company lost $652 million last year and has not turned a net profit since leaving bankruptcy protection in June 2009.
“I think it’s going to make a material difference to our profit-and-loss statement,’’ Marchionne said after touring a Detroit Jeep factory with Treasury Secretary Timothy Geithner. “It’s time to try to close the loop on what has been an incredibly necessary intervention’’ by the governments, he said.
At the Detroit Economic Club, Geithner said the government wants to sever its ties to Chrysler as quickly as possible, although it will balance that with the need to get the maximum return for taxpayers’ investment.
Chrysler took a total of $10.5 billion from the US government to survive two years ago.