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Marchionne Outlines Plan to Repay Chrysler’s Loans

Move takes maker step closer to IPO.

by on May.02, 2011

Why is this man laughing? Sergio Marchionne outlines details of the government loan payoff.

Chrysler will use a mix of loan money, new debt securities and a line of credit to repay the $7.5 billion it owes to the U.S. and Canadian governments, the maker announced today, providing the first details on a payback plan first announced last week.

At about the same time, the U.S. maker’s Italian partner, Fiat SpA, will invest $1.27 billion in order to increase its stake in Chrysler from 30% to 46%.

Sergio Marchionne, the CEO of both automakers, has indicated he expects to meet another hurdle set by the 2009 federal bailout to add yet another 5% stake, which would give Fiat a full 51% share of Chrysler.  Sometime after that, depending on Chrysler’s financial health and the strength of the stock market, the maker is expected to stage an IPO that would mark its return to public trading.

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Details of the loan repayment were announced today at the same time Chrysler revealed it has earned $116 million during the first quarter of 2011, its first net profit since emerging from bankruptcy in June 2011.  (For more on Chrysler’s earnings report, Click Here.)

The goal is to pay off $5.8 billion owed to the U.S. government by June 30th, along with another $1.7 billion due to the Canadian treasury.  Alternative financing will come from three components:

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