Feb 14, 2013

Fiat Negotiating With Banks to Purchase Rest of Chrysler

Fiat is negotiating privately with banks to secure a loan to buy the remaining 41.5% of Chrysler from the United Auto Workers medical benefits trust. Between negotiating the terms of the loan with the bank and negotiating the price of the shares with the UAW, it could take until the end of the year for the deal to be done, if it is successful. Estimates from accounting firm Goldman Sachs indicate that the value of the rest of Chrysler is about €2.23 billion ($2.98 billion). Insiders, indicate that Fiat would need to raise €1.5 billion ($2 billion) in loans to purchase Chrysler. It would pay the rest of the money itself either by issuing stock or using cash reserves. Fiat lost €1.04 billion ($1.4 billion) in 2012 and has €5.05 billion ($6.8 billion) in debt. Chrysler is attractive to Fiat because it is doing so well in North America. Buying Chrysler would allow Fiat to take advantage of Chrysler's success to prop up Fiat's ailing European auto business. Fiat is trying to return to profitability by 2015.  While Fiat already owns 58.5% of Chrysler, it has been trying to increase its stake to 65% for about six months. Fiat and the UAW are awaiting the court decision soon on how much those shares should cost. The UAW feels that the cost of the shares should reflect the value of Chrysler now, but Fiat believes the share price should be based on its value when it bought Chrysler.  Source: Automotive News via autoviva.com

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