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Thu April 28, 2011
Chrysler intends to repay government loans by end of June
Just ahead of a visit from U.S. Treasury Secretary Timothy Geithner, Chrysler says it intends to pay back the government loans it received by the end of June. Geithner was one of the main architects of the government bailouts for Chrysler and GM.
From the Detroit News:
Chrysler Group LLC today confirmed its intention to repay its $7.4 billion in loans to the U.S. and Canadian governments by the end of June, as long as market and other conditions remain conducive.
In a statement prior to CEO Sergio Marchionne hosting a visit from U.S. Treasury Secretary Timothy Geithner later today, Chrysler said it plans to repay its government loans with a new term loan facility and newly issued debt securities that will be sold to institutional investors in a private offering.
The Detroit Free Press reports Chrysler wants to pay back the debts because the interest rates on the government loans are high:
Marchionne has said he wants to refinance Chrysler’s debt because the interest rate is higher than commercial market rates. The effective interest on the borrowings from the U.S. is as high as 14% and as much as 20% on the Canadian debt.
In order to find investors, the Detroit News reports that senior executives will head out on a "road show" to court financial institutions. They report the automaker is currently working with Morgan Stanley, Goldman Sachs, Citigroup Inc. and Bank of America Corp.