Fiat in talks over Us$6.8bil Italian state-backed credit line

TURIN: Fiat Chrysler Automobiles NV and Italy’s Intesa Sanpaolo SPA are negotiating a state-backed credit line of as much as 6.3 billion euros (Us$6.8bil) in Europe’s biggest government-guaranteed financing for a carmaker since the coronavirus pandemic.

Italy’s top lender would lead a three-year loan facility to help finance the manufacturer’s business in the country, Fiat Chrysler said in a statement.

Sace SPA, Italy’s trade-credit insurer, would guarantee 80% of the amount in a mechanism that would need approval by the Finance Ministry. Bloomberg reported the talks.

Carmaking is among industries that have been hit hardest by the Covid-19 crisis, which forced factory stoppages and crippled sales in markets from China and Europe to the US Fiat Chrysler burned through Us$5.5bil in the first quarter.

The Italian-american company and French peer PSA Group last week scrapped the 1.1 billion-euro dividends that each agreed to pay as part of their 2019 merger agreement.

The financing would “provide further support to some 10,000 small and medium enterprises in the automotive supply chain in Italy following the reopening of the company’s Italian plants beginning at the end of April,” Fiat Chrysler said in its statement.

Companies worldwide have borrowed almost Us$600bil since late March to bolster their balance sheets. But no sector has been more aggressive than the auto industry, which has tapped banks for Us$100bil by either making drawdowns from existing facilities or seeking new loans.

General Motors Co and Ford Motor Co have tapped credit lines to stock up on billions of dollars in cash. Last month, Daimler AG secured a 12 billion-euro credit line and Renault SA struck a 5 billion-euro loan guarantee deal with the French state.

Governments across Europe have provided support for over 22 billion euros in corporate loan facilities through mid-may.

Fiat Chrysler has raised almost 10 billion euros to help it weather the pandemic. Earlier, it took out a new, 3.5 billion-euro loan and drew down 6.25 billion euros from a revolving facility.

Separately, the company is planning to repay part of the facility via a bond sale of as much as 1 billion euros, people familiar with the matter said last week.

Fiat, which stands for “Fabbrica Italiana Automobili Torino,” or Italian factory based in Turin, has faced criticism since shifting its centre of gravity out of Italy following its merger with Chrysler.