Chrysler Group completed its efforts to prepay its VEBA trust obligations.
Chrysler Group LLC has finished raising approximately $5 billion to prepay an unsecured note issued in June 2009 to the United Auto Workers VEBA Trust as Fiat’s takeover of Chrysler cleared another milestone.
Chrysler also disclosed it expects to record a non-cash charge of approximately $500 million in connection with the repayment of the VEBA Trust Note. The transaction helps the health care benefits promised more than 80,000 Chrysler retirees, who belonged to the UAW, more secure.
“This transaction brings to a successful and earlier than anticipated conclusion the process that led the U.S. and Canadian governments, the UAW and the VEBA, together with Fiat, to take on the task of reestablishing Chrysler as a viable automotive enterprise,” Chrysler Group LLC Chairman and CEO Sergio Marchionne said in a statement that accompanied the announcement had bee completed.
Marchionne added with the full early repayment of government loans in 2011, the acquisition from the VEBA of their Chrysler equity stake by Fiat in January of this year, and the full monetization of the VEBA note some nine years before the expiration of its term, Fiat and Chrysler together have satisfied all the monetary commitments that were made in 2009.
“None remain outstanding,” he said. “All this is simply a testament to the hard work by the people of Chrysler Group in the last five years and sets the stage for the next chapter as we work to strengthen our global presence as part of Fiat Chrysler Automobiles.”
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Marchionne added Fiat’s completion of the takeover of Chrysler is only the first step in building the new Fiat Chrysler Automobiles into a global company.
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The refinancing transactions completed this week, including the earlier private placement of a $3 billion note and $2 billion credit facility, are expected to result in yearly interest expense savings, for the period from 2014 to 2016, of approximately $200 million, including the elimination of the non-cash VEBA Trust Note discount amortization of approximately $65 million per annum.
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Marchionne has acknowledged the buyout of the VEBA trust 41.5% stake in Chrysler and the accompanying note have left FCA debt. But the debt is manageable, he told analysts last month.