Fiat SpA, Italy’s biggest manufacturer, will raise a 2 billion-euro ($2.7 billion) loan ahead of its planned merger with Chrysler Group LLC, according to two people with knowledge of the matter.
Nine banks have agreed to participate in the three-year credit line, said the people, who asked not to be identified because the terms are private. Barclays Plc, BNP Paribas SA, Citigroup Inc., Credit Agricole SA, Intesa Sanpaolo SpA, Mediobanca SpA, Royal Bank of Scotland Group Plc, Societe Generale SA and UniCredit SpA are due to sign agreements to participate in the deal on June 21, the people said.
The debt, which includes two one-year extension options, replaces a 1.95 billion-euro credit facility due July next year and will be offered to a wider group of lenders later this month, the people said.
The Italian automaker may raise as much as $10 billion from banks to increase its stake in Chrysler and to refinance both companies’ debt, people familiar with the matter said last month. The Turin-based company has built up a 58.5 percent stake in Chrysler, and is in talks to buy the remainder owned by the United Auto Workers’ retiree health-care trust, Chief Executive Officer Sergio Marchionne has said.
A spokesman for Fiat, who asked not to be named citing company policy, declined to comment on the financing.
Chrysler is also seeking to refinance its $2.95 billion term loan at a lower rate of interest, cutting the margin to 3 percentage points, or 300 basis points, more than the London interbank offered rate, from 4.75 percentage points, a person with knowledge of the transaction said June 12. Citigroup Inc., Morgan Stanley, Bank of America Corp. and Goldman Sachs Group Inc. are arranging the debt.
Marchionne said earlier this month he wants combine Fiat and Chrysler “as soon as possible.” He may create a new company in the U.S., merge Fiat and Chrysler into it, and issue shares in the combined entity, a person familiar with the matter said last month. As part of the refinancing, Chrysler may gain access to Fiat’s credit line, people said in March.