U.S. automaker Chrysler Group LLC borrowed $6.2 billion to refinance high-cost government loans stemming from its 2009 bankruptcy restructuring, people familiar with the matter said on Thursday.
Chrysler increased the amount of its first-lien term loan to $3 billion from $2.5 billion, they said. The U.S. automaker's second-lien bonds were cut by $300 million to $3.2 billion.
Chrysler's revolving credit facility has also been reduced to $1.3 billion from an initially planned $1.5 billion, the people said. This will be used for general corporate purposes and will not used to repay the debt.
The automaker owes about $7.5 billion to the United States and Canada for loans extended during a federal bailout in 2009 after a massive drop in auto sales pushed the company to the brink of collapse.
It emerged from bankruptcy nearly two years ago under the management of Italian automaker Fiat SpA
The term loan, bonds and about $1.3 billion in cash from Fiat will be used to repay the government loans, which bear high interest rates, costing Chrysler more than $1.2 billion last year.
This was the second time the U.S. automaker changed the structure of the refinancing package this week. Initially, Chrysler was looking for a $3.5 billion term loan and $2.5 billion in bonds.
But investor concerns about its financial outlook prompted Chrysler to the cut its term loan earlier this week to $2.5 billion and boost the bond offering to $3.5 billion.
Chrysler also revamped the term loan to include more bond-like features, which attracted investors. People familiar with the deal said this week that Chrysler's reworked term loan was oversubscribed.
By Thursday morning, the deal structure had changed again. At $6.2 billion, Chrysler's refinancing package is now $200 million more than its initial target.
Including the revolver, which was reduced to $1.3 billion, the company's total capital increase remains $7.5 billion.
The refinancing will help put the U.S. automaker on firmer financial ground as it gears up for an initial public offering that could come as early as this year.
With the loans being paid off with lower-interest loans, Chrysler will save money, which should show up on its bottom line, Edmunds.com analyst Michelle Krebs said.
Chrysler declined to comment. The company emerged from bankruptcy nearly two years ago under Fiat's management.
Since then, Chrysler has overhauled its vehicle lineup and cut costs. So far, the automaker has revamped 16 models and is developing new models that will move away from its traditionally truck-heavy lineup.
(Reporting by Michelle Sierra and Soyoung Kim; writing and additional reporting by Deepa Seetharaman; editing by Lisa Von Ahn, Gerald E. McCormick and Andre Grenon)