Awwal 24, 1432 / April 28, 2011, SPA -- Chrysler Group LLC, which came to the brink of collapse before a federal bailout in 2009, plans to fully repay more than $7 billion in loans from the U.S. and Canadian governments by the end of June, Reuters reported. The company's announcement on Thursday comes almost two years after Chrysler emerged from a U.S.-funded bankruptcy under the management of Italian automaker Fiat SpA. Thursday's announcement comes the same day U.S. Treasury Secretary Timothy Geithner is scheduled to make a trip to Detroit and meet with Sergio Marchionne, the chief executive of Fiat and Chrysler. Proceeds from term loans and debt sold to institutional investors will be used to repay the governments, Chrysler said in a statement. Chrysler aims to repay the governments and pay related fees and expenses in the second quarter. Fiat will also exercise an option to buy 16 percent of Chrysler for $1.27 billion during the quarter. Chrysler said it will use that cash to repay the loans. The debt offering, term loans and the cash infusion from Fiat are all expected to occur concurrently, the company said. Repaying the loans from the U.S. and Canadian governments would mark a critical step for Chrysler as the automaker tries to distance itself from the controversial rescue by the Obama administration and rebuild consumer confidence in the brand. It will also allow Chrysler to forgo high interest rates on the loans and put itself on firmer financial footing ahead of an initial public offering this year or next. Last year, Chrysler paid more than $1.2 billion in interest, or more than $3 million a day. "It's a very smart move on the part of Marchionne," said Dennis Virag, president of the Automotive Consulting Group Inc. "What he's doing is converting high-cost debt to lower-cost debt and he's providing financing for future product development for ultimately taking the corporation public." Marchionne is pushing Chrysler to earn net income of as much as $500 million this year. The company reports first-quarter earnings on May 2. The debt securities will be sold in a private offering exempt from registration under the U.S. Securities Act of 1933, Chrysler said in a statement. The face value of Chrysler's debt is about $7.5 billion. The refinancing also represents an important milestone for the Obama administration, which faced scrutiny over its highly unpopular decision to save the smallest and weakest of Detroit's three automakers from collapse. Geithner and Marchionne will tour Chrysler's Jefferson North assembly plant, where the company builds its highly touted Jeep Grand Cherokee. Marchionne, who divides his time between Italy and the United States, has been credited with reviving investor interest in Chrysler, an automaker that was left for dead just two years ago. The company has unveiled 16 new and revamped vehicles, including the Grand Cherokee and the Chrysler 300. The company has also built some renewed buzz for its flagship brand with a Super Bowl ad and the tagline "Imported from Detroit." -- SPA
