Chrysler Struggling to Raise $20 Billion in Loans -- WSJ

Chrysler is having difficulty raising the $20 billion in the debt markets it requires to fund its operations following its pending buyout by hedge fund Cerberus Capital Management, according to the Wall Street Journal. Chrysler's bankers have struggled to convince investors to purchase $12 billion in loans for the company's auto business and $8 billion in loans for its financial unit. The underwriters are now discussing taking on half or more of $10 billion worth of the auto loan. The banks would take the first hit if Chrysler fails to repay; investors holding the rest of the loan would have first rights to the company's assets in the event of default. A $2 billion chunk of the auto loan will be offered at a higher interest rate, as will the loan sale for Chrysler Financial. Chrysler will have to raise another $42 billion in loans to pay Daimler for Chrysler debt it is holding, but that sale is expected to be easier because it will be backed by "healthy Chrysler auto loans." The tough debt market could affect rival Ford's attempts to sell off its Jaguar and Land Rover brands. This week, a $3.1 billion loan sale intended to finance the buyout of GM's Allison Transmission unit was postponed.

Sources: Wall Street Journal
Commentary: Pimco Chief Bill Gross: 5-10% Correction May Be Ahead • Borrowing Costs Rising in Chrysler, Other Buyout Deals • Daimler Ex-Chrysler Is a Bargain - Barron's
Stocks/ETFs to watch: DaimlerChrysler AG [USA] (DCX). Competitors: Ford Motor Co. (F), General Motors Corp. (GM), Toyota Motor Corp. (TM). ETFs: WisdomTree International Cons Cyclical (DPC), iShares S&P Global Cons Discretionary (RXI), iShares MSCI Germany Index (EWG)
Earnings call transcripts: Q1 2007

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