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Chrysler Will Repay Government Loans

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author photo by Autotrader May 2011

Chrysler Group LLC says it will repay the $7.5 billion it still owes on loans it borrowed from the US and Canadian governments to stay alive during the recession. The money to do so will come from a new commercial loan and the sale of securities to institutional investors.

That money, along with additional cash from Fiat, which will exercise an option to increase its stake in Chrysler from its current 30 percent to a 46 percent share, is expected to be enough for the company to repay the loans by the end of June.

Fiat’s increased ownership will end US and Canadian government stakes in Chrysler, though it will still leave the Voluntary Employees Beneficiary Association retirement plan as the majority shareholder.

Chrysler has introduced a raft of remarkably updated models across its product line for the 2012 model year and is launching the Fiat brand in the US this year. But some customers who were grumpy with the government’s intervention on Chrysler’s behalf (and General Motors’ too) have turned to Ford, which didn’t take any government funds. It is possible that Chrysler will be able to start winning these buyers back once the government loans are repaid and Uncle Sam is no longer a shareholder.

Because Chrysler plans to sell its securities to institutional investors in a private offering, the company says that the offering need not be registered with the Securities and Exchange Commission – but the company cautioned that it still depends on the SEC confirming its exemption.

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Chrysler Will Repay Government Loans - Autotrader