Fiat SpA (F) is approaching banks to refinance a 1.95 billion-euro ($2.5 billion) credit line as the Italian carmaker weighs options to buy the Chrysler Group LLC stake it doesn’t own, two people familiar with the matter said.
Sergio Marchionne, chief executive officer of both automakers, is seeking as soon as next month to refinance the revolving credit line expiring next year, said the people, who asked not to be identified because the talks are private. Fiat doesn’t comment on its finance strategy, a representative said.
The CEO aims to acquire the 41.5 percent of Chrysler held by the United Auto Workers’ medical benefits trust and merge the two carmakers to create a global automaker out of the two regional manufacturers. Fiat is relying on Chrysler to sustain earnings after the loss at the Italian automaker’s mass-market brands widened in Europe in 2012 to more than 700 million euros.
“It’s not just about having cash for Chrysler,” Erich Hauser, a Credit Suisse analyst in London, said in an e-mail. “Fiat need to secure liquidity as it burns cash” in Europe.
The shares were up 1 cent, or 0.2 percent, to 4.17 euros as of 4:05 p.m. in Milan trading. The stock has gained 10 percent this year, giving the company a market value of 5.2 billion euros.
As part of the refinancing, the ring-fencing of the credit line that limited its use to Fiat may be lifted to give Chrysler access to the cash too, the people said.
The UAW confirmed in February that talks were under way between Fiat and the union’s trust fund in preparation for a possible sale of the stake it owns on behalf of retirees.
A U.S. court may rule in June or July on the amount Fiat must pay the UAW retiree fund for part of its holding, the CEO said March 19. Fiat has already exercised options to increase its stake to about 65 percent from the current 58.5 percent. The fund hasn’t handed over the shares because of the price dispute.
Marchionne aims to create a single company after already integrating the two on an operational level, he said this month. Chances are about even between Fiat buying out the fund and the fund holding an initial public offering to sell its stake, he said. The company has started the valuation process for the UAW retiree holding, Marchionne said March 5.
Following a merger, the manufacturer should consider “the possible benefits” of a U.S. stock listing, Marchionne said. A final combination between the two may happen this year, he said at the Geneva car show this month.