Fiat SpA, Italy’s largest carmaker, is sounding out investment banks about plans for a ¤2 billion ($2.5 billion) rights offering amid a slump in demand for vehicles, three people familiar with the talks said.
The carmaker hasn’t yet decided whether to proceed with the plan, said the people, who declined to be identified before an agreement. Fiat has lined up a ¤1 billion loan, less than it originally sought, from Intesa Sanpaolo SpA, UniCredit SpA and Credit Agricole SA, one person said.
Fiat needs to pay back ¤4.8 billion of debt this year and may have its credit rating slashed to junk status. Fiat is poised to benefit from part of the ¤2 billion stimulus package the government offered car buyers in February. French competitors got ¤6 billion in loans. Chief Executive Officer Sergio Marchionne said January 22 that the Turin, Italy- based company may consider alliances with European competitors following its planned tie-up with US automaker Chrysler LLC.
“It would make sense for Fiat to do a rights offer of ¤2-¤3 billion to reduce indebtedness and not be downgraded,” said Eric Michelis, an analyst at Societe Generale SA in Paris. An agreement with another carmaker “would make a share sale much more marketable,” he added.
A spokesman for Fiat declined to comment. The company, controlled by the Agnelli family, isn’t seeking to raise cash, Simone Migliarino, head of communications, said January 22. Fiat said it won’t pay a dividend for 2008 after net debt jumped to ¤5.9 billion at the end of 2008.
Fiat will provide Chrysler technology to manufacture fuel- efficient and small cars, in exchange for an initial 35 per cent stake. The company has said that it won’t make a cash payment to Chrysler and isn’t committing to future funding.
