Chrysler has just announced that earlier today, it repaid the entirety of the company’s outstanding loans to the U.S. and Canadian governments. The company made payments of $5.9 billion and $1.7 billion to the U.S. Treasury and to Export Development Canada, respectively, retiring the loans made to Chrysler during its bankruptcy in June 2009. This means the U.S. government no longer has a stake in Chrysler.
We should bear in mind, however, that Chrysler didn’t take $6.7 billion from an enormous piggy bank (it would need to hold 67 pallets of cash, by our estimation). While the company did draw the money from liquid reserves (the corporate equivalent of a piggy bank), it recently secured $7.5 billion in new loans from banks, bonds, and an infusion of cash from Fiat. All it took in return for Fiat’s $1.3 billion was an additional 16-percent stake in the company, meaning Fiat now owns 46 percent of Chrysler.
The most important consequence of this news, however, is that it clears Fiat to take a majority stake in Chrysler. One of the conditions of the big Chrysler bailout was that the loans had to be repaid before Fiat could increase its share in Chrysler to 51 percent. With this in mind, we expect Fiat to finish its takeover of Chrysler soon, and probably even before an initial public offering of shares in Chrysler to the public.Tags: Chrysler |