Fiat Rejects Report of Pending Chrysler Capital Increase

Fiat Drops on Press Report of Capital Increase
Fiat is the worst performer today in Italy’s benchmark FTSE MIB index and the Stoxx 600 Automobiles and Parts Index. Photographer: Oliver Bunic/Bloomberg

Fiat SpA denied an Italian newspaper report that it’s planning a capital increase to raise money to boost its holding in Chrysler Group LLC.

“There is no specific project” to sell new shares, and the company “believes that there is no need for a capital increase,” Fiat said today in a statement, responding to a report by daily Il Messaggero. The shares, which had fallen as much as 6.4 percent, pared losses after the denial.

Talks with banks on financing for the purchase of the remaining 41.5 percent of Chrysler that Fiat doesn’t already own are in their early stages and a decision isn’t imminent, said four people familiar with the matter. Banks are proposing a range of options to Fiat, said the people, who asked not to be identified because the plans are private.

Fiat has been looking to buy the Chrysler stake held by the United Auto Workers’ retiree health-care trust to facilitate access to the U.S. automaker’s cash and push integration, as it loses money in Europe. The stake may cost about 3 billion euros ($3.9 billion), according to an estimate from Bernstein Research analyst Max Warburton.

“We believe that the scenario of a capital increase cannot be ruled out,” Banca Akros analyst Gabriele Gambarova said in a note today. He cut his rating on the stock to hold from accumulate.

Fiat shares dropped as much as 24 cents to 3.46 euros in Milan and were down 10 cents as of 2:34 p.m. in Milan. The stock has plunged 26 percent over the past three months, making it the worst performer on the Stoxx 600 Autos and Parts Index and valuing the Turin-based company at 4.5 billion euros.

Executives working for Chief Financial Officer Richard Palmer held meetings with Goldman Sachs Group Inc., Morgan Stanley, UniCredit SpA and Bank of America Merrill Lynch on a possible capital increase of 1 billion euros to 2 billion euros to be carried out next year, Il Messaggero reported today without saying where it got the information.

Sergio Marchionne, who is chief executive officer of both Fiat and Chrysler, said in October that all options are “on the table” to raise capital.

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