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VEBA loans all paid

by David Zatz on

Chrysler Group has announced that it has raised around $3 billion in secured senior debt securities, and around $2 billion in senior secured term loan facilities, and has used the money to repay the $5 billion it owed to the VEBA trust under a note issued on June 10, 2009.

Around $1.38 billion of the new debt is in 8% Secured Senior Notes, with a similar amount in 8¼% Secured Senior Notes due 2021. The yield to maturity is 6.165% and 6.433% per year, respectively.

Another $250 million in term loans was borrowed under existing senior secured credit facilities maturing May 24, 2017, under which Chrysler Group borrows at 2.75% over LIBOR, subject to a LIBOR floor of 0.75%; and another $1.75 billion of term loans were borrowed under a new senior secured term loan facility maturing December 31, 2018, at 2.50% over LIBOR, subject to a LIBOR floor of 0.75%.

Refinancing should cut annual interest by around $200 million per year for 2014-2016, including $65 million of savings from ending the VEBA Trust Note’s discount amortization. Chrysler expects to record a non-cash charge of around $500 million in connection. 

UAW and FCA

Chrysler and FCA CEO Sergio Marchionne reported that this brings the last thread of the Chrysler bankruptcy-and-recreation saga to an end, with both government repayments and VEBA Trust payoff occurring far earlier than expected.  “All this is simply a testament to the hard work by the people of Chrysler Group in the last five years and sets the stage for the next chapter as we work to strengthen our global presence as part of Fiat Chrysler Automobiles.” 

(Chrysler Group consolidated financial statements are prepared in accordance with US GAAP accounting systems. Fiat Group uses the IFRS system, which will state the annual interest savings at $134 million. Fiat  does not expect to record non-cash charges in connection with Chrysler Group’s repayment of the VEBA Trust Note, which has been carried at face value.)


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