Fiat Chrysler In Talks For $6.8 Billion State-Backed Loan In Italy


Fiat Chrysler Automobiles (FCAU) is in talks with Intesa Sanpaolo (ISNPY) over a 6.3 billion euro ($6.8 billion) loan backed by the Italian government to help the automaker cope with the production disruptions caused by the coronavirus-related stay-at-home orders.

Discussions are under way for a 3-year credit facility tailored to finance Fiat Chrysler’s operations in Italy and to provide further support to some of its 10,000 small and medium automotive enterprises in the country.

Since the end of April, the automaker is gradually resuming its operations in Italy after the coronavirus pandemic froze demand and meant manufacturers were forced to bring production to a halt.

The credit facility will be established for the sole purpose of payments to Italian suppliers, to support their liquidity and, at the same, support the resumption of production and investment at Italian plants.

Fiat Chrysler has 55,000 employees at its 16 plants and 26 R&D sites. In addition, over 200,000 jobs at 5,500 highly-specialized Italian suppliers will be dependent on the successful continuity of the company’s operations.

The coronavirus pandemic impact has wiped off almost 50% of Fiat Chrysler’s share value so far this year.

Overall Wall Street analysts are cautiously optimistic about Fiat Chrysler’s stock. The Moderate Buy consensus consists of 4 Buys, 2 Holds and 1 Sell. The $10.77 average price target indicates shares have potential to soar 38% in the coming 12 months. (See Fiat Chrysler stock analysis on TipRanks).

Last week, Fiat Chrysler and PSA Groupe, owner of Peugeot S.A., said in a joint statement that they each decided to scrap their planned ordinary dividend on 2019 results due to the impact of the coronavirus pandemic. The move will save 1.1 billion euro ($1.19 billion).

The cash preservation measure comes as the two automakers last year entered into a merger agreement to create the world’s fourth-largest automaker with a combined market value of about $50 billion.

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