Chrysler, a car company that was on the ropes only two years ago is now well into recovery. So much so that the company will soon repay $7.5 billion in bailout money that the U.S. and Canadian governments loaned the company two years ago. Chrysler plans to pay back government debt later in the second quarter of 2011 using money from new bank loans as well as an upcoming bond sale.By refinancing Chrysler can repay a the bulk of the bailout from the U.S. and Canada, which carry high interest at 12%, and by extension save millions as they continue their quest to make an IPO later this year. Interest on the government loans cost the company an estimated $1.2 billion in 2010. Those interest payments were a big factor in Chrysler reporting a loss of over $650 million.
The company plans to sell bonds to institutional investors in a private offering to obtain the money to repay the government loans. Fiat, which runs Chrysler, will pay $1.3 billion to the company once the government loans are repaid. In exchange Fiat, which currently owns 30% of the company will get an additional 16% . Fiat can get another 5% (to total 51% ownership) when the company produces a 40 mpg car for the U.S. market.