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Report: Chrysler To Announce Repayment Of Government Loans

April 27, 2011

Sources close to Chrysler report that the automaker is close to announcing a refinancing package that would eradicate $6.6 billion in loans provided by the U.S. and Canadian governments.  The loans have long been an issue for Chrysler CEO Sergio Marchionne, who vocally objected to their high interest rates before acknowledging that the high risk warranted above-market rates. Some current government loans carry interest rates as high as 20 percent, costing Chrysler $1.23 billion in interest payments during 2010.

 

Chrysler is expected to announce the refinancing on Thursday, coinciding with a visit by Treasury Secretary Timothy Geithner. Geithner will be in Detroit to address the Detroit Economic Club on the state of the economy, but will also take time to visit a nearby Chrysler manufacturing facility.  Full details on the loan repayment will likely be presented when Chrysler delivers their first-quarter financial results on Monday, May 2.

 

Repayment of the government loans will help Chrysler reduce their expenditure by as much as $93 million per month, and will likely pave the way for a Chrysler public stock offering later this year or early in 2012. Repayment also defuses a potential political time bomb in a non-election year, something favored heavily by the current administration.

 

(Yahoo News)

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