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Old 05-23-2011, 01:54 PM   #1
crowe
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Default Chrysler Will Pay Back U.S. Loans Tomorrow

http://www.bloomberg.com/news/2011-0...archionne.html
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Old 05-24-2011, 06:41 AM   #2
The StraightShooter
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This is good news indeed.
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Old 05-24-2011, 10:40 AM   #3
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This is good news indeed.
I would agree and I'll be the first to admit I doubted it would ever happen.

I have often said I thought Chrysler was worth more to Marchionne "dead than alive" but paying off the loans to the U.S. and Canadian governments is a big step to proving that I was wrong.

Chrysler indicates they'll save $350 Million per year in interest expenses now that the government loans have been paid off and new loans have been secured.
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Old 05-24-2011, 10:56 AM   #4
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I wonder if ALL of Fiats assets will be on the line or will they just use the Chrysler US assets.
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Old 05-24-2011, 10:57 AM   #5
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Default Fiat will invest $1.3 Billion to increase equity to 46%

The Wall Street Journal is reporting that concurrent with the government loan payoff that Fiat is investing $1.3 Billion to increase their equity in Chrysler from 30% to 46%.

As I recall, Fiat will be able to secure an additional 5% of equity in Chrysler from the U.S. Government for free once they meet the final of three criteria - I think it's the 40 MPG vehicle requirement.

On a different note, the WSJ report indicates the interest rate on the $3.2 Billion bond Chrysler just issued varies between 8.0% and 8.25% - a lot lower than I would have thought.
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Old 05-24-2011, 11:04 AM   #6
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I wonder if ALL of Fiats assets will be on the line or will they just use the Chrysler US assets.
That's a good question and although I'm not an expert I'm pretty certain Chrysler will now be treated as a division of Fiat and the parent company will be responsible for their debts and obligations.

That said, I bet if Chrysler were to file Chapter 7 tomorrow the bond holders would only be able to lay claim to Chrysler's U.S. assets and Fiat would be protected by a corporate shield.

It's a good question and one more reason why I'm surprised Chrysler was able to find financing to pay off the government loans.
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Old 05-24-2011, 11:17 AM   #7
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Chrysler Repays Governments as Fiat Boosts Stake

The U.S. government still owns 6.6 percent of Chrysler.
“The Treasury said today it isn’t likely to recover its remaining $1.9 billion investment in Chrysler.”
Oh well almost.

http://www.bloomberg.com/news/2011-0...ip-to-46-.html
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Old 05-24-2011, 11:30 AM   #8
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Default Chrysler's current equity holders

Once Fiat completes their $1.3 Billion investment Chrysler will be owned by the following equity holders:
  • Fiat -- 46%
  • UAW -- 45.7%
  • U.S. Government -- 6.6%
  • Canadian Govt. -- 1.7%
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Old 05-24-2011, 02:07 PM   #9
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“The Treasury said today it isn’t likely to recover its remaining $1.9 billion investment in Chrysler.”
Oh well almost.
That's interesting. I'm guessing the $1.9 Billion is the money the Treasury loaned to the OLDCO version of Chrysler that they knew they'd never get back.

That said, it's an important distinction between the Loan Guarantees of 1979 and the Bail Out of 2009 - the U.S. Government never lost a dime with the 1979 Loan Guarantees.
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Old 05-25-2011, 09:31 AM   #10
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Default Lots of positve press coverage

To Chrysler's credit they received a great deal of positive press coverage by paying off the government loans. Not only will the loan repayment result in a $350 Million annual savings in interest expense it generated a lot of positive PR as well.
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Old 05-26-2011, 01:37 PM   #11
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"Oh well, almost" indeed : http://www.sfexaminer.com/blogs/belt...ilout-pay-back
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Old 05-26-2011, 02:43 PM   #12
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Thanks for posting the link - I hadn't seen that article.

While I know other OEMs have received loans from the Department of Energy the Chrysler loan does reek of political gamesmanship.

If the President's Task Force was so sharp, why did they cast off Chrysler Financial as being too far gone to save only to watch Cerberus sell CF for $6.3 Billion less than two years later?
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Old 05-27-2011, 05:08 AM   #13
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To quote a great American, Gomer Pyle......"Surprise, Surprise, Surprise"

Sounds like robbing Peter to pay ......well......PETER!
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Old 05-27-2011, 08:21 AM   #14
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It's just a shell game for political gain. I sure hope we kick their a__ in the lawsuit and then they can put some money where it belongs. You gotta love these clowns in Washington.
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Old 05-27-2011, 02:03 PM   #15
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Default Fiat intends to buy the remaining 6.6% of the Treasury's stake

Various new reports are indicating that Fiat has notified the U.S. Treasury they intend to buy the government's remaining 6.6% equity in Chrysler. This move would give Fiat 52% of Chrysler and eliminate the government's equity position.

Here's a link to the report in the USAToday - click here
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