Fiat may pay $1.5 b to up Chrysler stake

Fiat is also working to raise about $2.17 billion through a credit facility and is expected to launch the deal in coming months, according to sources.

The credit facility is planned for the automaker’s general liquidity purposes and is expected to remain undrawn.

Fiat, which currently holds a 30 per cent stake in Chrysler, aims to obtain majority control of the latter by the end of 2011 - one of Chief Executive Sergio Marchionne’s overarching goals as he tries to integrate the two car companies.

As part of the 2009 bailout deal agreed with Washington, Fiat was given management control and a minority stake in Chrysler. Under the terms of the US Treasury agreement, Fiat can exercise an option to buy a 16 per cent stake in Chrysler if the loans it owes the US and Canadian governments fall below $4 billion.

Repaying the loans stemming from its 2009 bailout would mark a critical step for Chrysler as it tries to distance itself from the controversial rescue by the Obama administration and rebuild consumer confidence in the brand.

A financial integration of the two automakers could also make Chrysler a better story for potential stock investors when the company eventually goes public later this year or next.
Chrysler’s initial public offering, which was originally expected to take place in the second half of this year, could be pushed into 2012 as Fiat wants to secure majority control of the US automaker. But before Fiat can take control, Chrysler must repay its loans of $5.8 billion and $1.3 billion to the US and Canadian governments, respectively, in full.