Chrysler’s Sergio Marchionne yesterday stands over a Fiat 500 cabriolet at the opening of a dealership in Michigan.
(Carlos Osorio/ Associated Press)
Chrysler set to repay $7.5b in loans
Chrysler’s Sergio Marchionne yesterday stands over a Fiat 500 cabriolet at the opening of a dealership in Michigan.
(Carlos Osorio/ Associated Press)
MACOMB TOWNSHIP, Mich. — Chief executive Sergio Marchionne said yesterday that Chrysler Group will save $300 million in interest a year when it repays $7.5 billion in US and Canadian government loans today.
Marchionne has said that Chrysler is eager to pay back its loans in part because of the governments’ high interest rates of about 12 percent, which cost the company $1.2 billion last year.
Under a new loan package disclosed last week, the company’s interest rates will fall to around 6 percent. That will boost the bottom line at Chrysler. The company reported a $116 million profit — its first profit since its 2009 bankruptcy — in the first quarter.
To pay back the loans, Chrysler is issuing $3.2 billion in bonds and taking out $4.3 billion in bank loans. It also will use a $1.3 billion investment from Italian automaker Fiat SpA. In exchange, Fiat will increase its ownership stake in Chrysler to 46 percent.
The company still owes the US government $2 billion. The government could get some of that back by selling its 8.6 percent stake in Chrysler.
Marchionne said yesterday that he has not discussed with the US government how soon it will sell its stake in Chrysler.
Chrysler got around $10.5 billion from the United States to stay alive through bankruptcy.
© Copyright 2011 Globe Newspaper Company.
