Chrysler to repay U.S., Canada loans by June 30

By @ibtimes on

Chrysler Group LLC, which came to the brink of collapse before a federal bailout in 2009, plans to fully repay more than $7 billion in loans from the U.S. and Canadian governments by the end of June.

The company's announcement on Thursday comes almost two years after Chrysler emerged from a U.S.-funded bankruptcy under the management of Italian automaker Fiat SpA .

Chrysler will use the proceeds from term loans and a debt offering to repay the governments. The company will also funnel cash from Fiat to repay the loans.

Fiat announced earlier that it plans to buy a 16 percent stake in Chrysler for $1.27 billion. The debt offering, term loans and the cash infusion from Fiat are all expected to occur concurrently, the company said.

The U.S. automaker did not divulge any figures, but people familiar with the matter said Chrysler plans to borrow $6 billion in term loans and bonds to repay the government debt.

Next month, Chrysler executives will begin to court potential debt investors, primarily in North America, as part of a road show.

Repaying the loans from the U.S. and Canadian governments would mark a critical step for Chrysler as the automaker tries to distance itself from the controversial rescue by the Obama administration and rebuild consumer confidence in the brand.

The refinancing deal also paves the way for Italian automaker Fiat to take a majority stake in Chrysler.

Analysts and bankers have said this would make the U.S. automaker a more attractive story for potential investors in an initial public offering that could come as early as this year.

It will also put the company on firmer financial footing by allowing Chrysler to forgo the high interest rates on the government debt. The face value of Chrysler's debt is about $7.5 billion.

Sergio Marchionne, the chief executive of Fiat and Chrysler, has said the loans have undercut the company's ability to return to profitability.

(Reporting by Deepa Seetharaman, editing by Gerald E. McCormick, Dave Zimmerman)

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