Chrysler to repay $7.5 billion bailout loans
Detroit, MI, United States (AHN) – Chrysler Group has apparently recovered from the slump that hit the auto industry in 2008. With the carmaker’s start of recovery, the company will repay on May 24 the $7.5 billion it borrowed from the U.S. and Canadian governments to further improve its bottom line.
The loans were part of the bankruptcy restructuring that the two governments extended to Chrysler and General Motors when the U.S. car industry was about to collapse from weak sales.
The repayment of the loans is a condition for new Chrysler operator, Fiat, to increase its stake in the American car manufacturing firm to 46 percent from 30 percent.
To repay Washington and Ottawa, Chrysler will use $3.5 billion in bonds, a $2.5 billion term loan and $1.3 billion in cash from Fiat.
Last month, Chrysler announced it would repay the two governments its loan by the end of June. After the announcement, Chrysler and Fiat Chief Executive and Chrysler Chief Financial officer Richard Palmer sought potential lenders, which would offer lower interest rates.
Marchionne attributed the company’s deficit to the interest payments it made on the government loans. In 2010, Chrysler reported a $652 million loss, partly because of $1.23 billion interests it paid on the bailout loans.
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