Fiat rebuts report will raise funds for Chrysler buy

Fri Dec 14, 2012 8:30am EST
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By Jennifer Clark and Sophie Sassard

MILAN/LONDON (Reuters) - Italian carmaker Fiat SpA FIA.MI rebutted a report that it was set to raise money to finance its purchase of a further stake in Chrysler, saying it had no need for extra funds.

Its comment came after an unsourced report in Il Messaggero said Fiat was sounding out UniCredit (CRDI.MI: Quote), Morgan Stanley (MS.N: Quote), Bank of America (BAC.N: Quote) and Goldman Sachs (GS.N: Quote) about the possibility of raising between 1 and 2 billion euros ($1.3-$2.6 billion).

"Fiat states there is no specific project in such respect, and believes that there is no need for a capital increase," the company said in a statement on Friday.

The situation is important for Fiat, whose Chief Executive Sergio Marchionne is determined to gain full control of Chrysler by buying the remaining 41.5 percent stake from VEBA, a union trust.

This would allow the Italian company to restructure debt, boost earnings and support its struggling European operations until the economy recovers.

Chrysler is worth between $9 billion and $13.4 billion, UBS estimated in November, meaning the 41.5 percent stake would be worth between $4.1 billion and $5.5 billion.

VEBA took the stake in Chrysler during the carmaker's U.S.-government-led restructuring in 2009 and is seeking to maximize the stake's value.

Fiat said on October 31 it had 9.8 billion euros in liquidity - or cash and near equivalents - and Chrysler had 10.2 billion euros. But it needs a liquidity cushion to maintain its credit rating. Moody's cut Fiat's credit rating to Ba3 with a negative outlook in October.   Continued...

A company logo is seen on a Fiat car displayed on media day at the Paris Mondial de l'Automobile, September 28, 2012. REUTERS/Christian Hartmann