Fiat seeks €6.3bn Italian state-backed loan to offset economic effects of virus

Fiat Chrysler Automobiles and Italy’s Intesa Sanpaolo are negotiating a state-backed credit line of as much as €6.3 billion (Dh25bn) in Europe’s biggest government-guaranteed financing for a car maker since the coronavirus pandemic began.

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

Sace, Italy’s trade credit insurer, will guarantee 80 per cent of the amount in a mechanism that would need approval by the finance ministry.

Car manufacturing is one of the industries hit hardest by the Covid-19 crisis, which forced factory stoppages and affected sales in markets in China, Europe and the US.

Fiat Chrysler burnt through $5.5bn (Dh20.2bn) in the first quarter. The Italian-American company and French peer PSA Group last week scrapped the

€1.1bn in 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 on Saturday.

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

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

Governments across Europe have provided support for over €22bn in corporate loan facilities through mid-May.

Fiat Chrysler has raised almost €10bn to help it weather the pandemic. Earlier, it took out a €3.5bn loan and drew down €6.25bn from a revolving facility.

Separately, the company is planning to repay part of the facility via a bond sale of as much as €1bn.

Fiat has faced criticism since shifting its centre of gravity out of Italy after its merger with Chrysler. The car maker moved its legal headquarters in 2014 to the Netherlands and its tax residence to the UK.