Chrysler Group LLC, the U.S. automaker controlled by Italy’s Fiat SpA, is seeking to reduce the rate on a $2.95 billion term loan, according to a person with knowledge of the transaction.
The company proposed paying interest at 3 percentage points to 3.25 percentage points more than the London interbank offered rate, with a 1 percent floor on the lending benchmark, said the person, who asked not to be identified because the terms are private. The debt, which matures in 2017, currently pays interest at 4.75 percentage points more than the lending benchmark with a 1.25 percent minimum, according to data compiled by Bloomberg.
Citigroup Inc., Morgan Stanley, Bank of America Corp. and Goldman Sachs Group Inc. are arranging the financing and investors are asked to let the banks know by June 18 at 5 p.m. in New York whether they will participate, according to the person. The deal is expected to close on June 21.
Fiat is in talks to buy the remaining stake in Chrysler owned by the United Auto Workers’ retiree health-care trust, according to Sergio Marchionne, chief executive officer of the two manufacturers.
“We have been working on the project for a long time, we’ll try to complete it as soon as possible,” Marchionne said on June 7 in Venice, Italy.
Chrysler, based in Auburn Hills, Michigan, has credit ratings of B1 from Moody’s Investors Service and B+ at Standard & Poor’s, four levels below investment-grade.
The company has $3.2 billion of notes, a $2.95 billion term loan and a $1.3 billion revolving credit line, Bloomberg data show. The revolver, which matures in 2016, had no outstanding borrowings at the end of March, according to Bloomberg data.
Lenders who participate in the bank loan refinancing will have 101 soft-call protection for the first six months, meaning Chrysler would have to pay 1 cent more than face value to reprice the debt during that period, according to the person with knowledge of the transaction.
Katie Merx, a spokeswoman for Chrysler, declined to comment on the financing.