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Chrysler Pays UAW Trust $5 Billion to End Bankruptcy Chapter

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Chrysler Chief Executive Officer Sergio Marchionne
Chrysler Chief Executive Officer Sergio Marchionne said, “Fiat and Chrysler together have satisfied all the monetary commitments that were made to Chrysler in 2009.” Photographer: Alessia Pierdomenico/Bloomberg

Feb. 10 (Bloomberg) -- Chrysler Group LLC, the American carmaker owned by Fiat SpA, will pay $5 billion to a United Auto Workers trust, completing the final payments that the company owed as a result of its bankruptcy.

Chrysler today closed a bond sale to reimburse the UAW health-care trust for a note it provided five years ago as part of the automaker’s financial rescue, the U.S. manufacturer said in a statement.

Fiat last month bought the 41.5 percent Chrysler stake held by the trust, which was created to pay medical bills for union retirees, to gain full control of the U.S. business. The combination creates the world’s seventh-largest auto manufacturer. Fiat Chief Executive Officer Sergio Marchionne, 61, wants to transform the company with a scale that can challenge the likes of General Motors Co. and Volkswagen AG.

“Getting full control of Chrysler is a big step but only a first step,” Erik Gordon, a professor at the University of Michigan’s business and law schools, said in an e-mail. “Now he will have to display world-class operating skills to integrate the companies and compete globally,” he said.

Chrysler raised about $3 billion in bonds and $2 billion in loans, Bloomberg data show. The company issued $1.375 billion of 8 percent bonds due June 2019, at an issue price of 108.25 cents, and $1.38 billion of 8.25 percent securities due June 2021, at an issue price of 110.5.

Loan Terms

The company also borrowed an additional $250 million of term loans through its credit facility due May 2017 and obtained a new $1.75 billion senior secured term loan facility due Dec. 2018, which pays interest at 2.5 percentage points more than the London interbank offered rate, with a 0.75 percent floor on the lending benchmark, Bloomberg data show.

In a revolving line of credit, money may be borrowed again once it’s repaid, while in a term loan it can’t.

Fiat, which owned 58.5 percent of Chrysler prior to the full takeover, relies on the U.S. for profit because of losses in Europe amid a six-year car-market contraction in the region.

Fiat plans to move its primary listing to New York and rename itself Fiat Chrysler Automobiles NV. The manufacturer aims to complete the New York listing by Oct. 1 and will also continue to have shares traded on the Milan exchange.

Fiat fell as much as 1.4 percent to 7.20 euros and was trading at 7.23 euros at 4:26 p.m. Milan time, down 1 percent, valuing the carmaker at 9.04 billion euros ($12.33 billion).

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; Mark Clothier in Southfield, Michigan at mclothier@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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