Chrysler Seeks Government Loan Re-Fi
With about $7.84b of cash on-hand and $7.4b in debt to the US and Canadian governments, Chrysler wants to take a page out of GM’s IPO playbook and secure a Wall Street refinance of its government debt, which bears interest of between 14 and 20 percent. CEO Sergio Marchionne had already complained that servicing its government debt prevented Chrysler from achieving profitability in the second quarter. According to Automotive News [sub] Chryler is shopping banks as it seeks loans at newly-low interest rates in order to shore up its balance book ahead of an IPO sometime next year. Chrysler needs $3b of cash on-hand for its operating and debt servicing costs, so a failure to secure new funding could cause its cash levels to dip to dangerous levels. GM has said that its recently-acquired $5b revolving credit line would not be tapped right away, but would provide a liquidity cushion of the kind that Chrysler arguably needs even more than The General. On the other hand, it’s easier to borrow money when you have money, and GM is sitting on considerably more cash than Chrysler. Meanwhile, Fiat has yet to inject a single Euro of cash into Chrysler. Maybe this is Marchionne’s chance to put some real skin in his Chrysler play.
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"Maybe this is Marchionne’s chance to put some real skin in his Chrysler play." Likely not, unless no other option remains, S.M. is unlikely to do that. (Although just a modest contribution would do wonders for Public Relations.)
HerrKaLeun, you are in error. Chrysler didn't FORCE anybody into anything. Our government dictated ALL the terms of Chrysler's bankruptcy, including the loan. The pre-bankruptcy owner Cerberus was anxious to be rid of Chrysler before it cost them money, and was willing to write off its modest investment. The banks, like Citi, and bond holders were less anxious but were forced into writeoffs/losses by the government's whiz kids, who did great violence to bankruptcy law in the process. The government then gave operating control to Fiat, and majority ownership to the UAW VEBA trust in lieu of the cash Chrysler owed. In so doing, the government gave Chrysler a reprieve and washed their hands of responsibility for what might happen to the company in the future. There's no way to blame anyone at Chrysler for the bankruptcy terms, since Daimler and Cerberus had aleady stripped it down to a shell of what it had been a decade before. The book has yet to be written, that details the systematic destruction of a successful, very profitable company in only eleven years, by German and Wall Street strip and flip artists. When that book is written, I hope it names names, but it won't be names of managers who ran Chrysler who quit when they saw what the owners were doing, or were fired/laid off.
Your absolutely right, Lorenzo! I'll be the first in line to purchase that book when it comes out. Well said.