US-Italian automaker Fiat Chrysler Automobiles NV (FCA) has partnered with Italian banking group Intesa Sanpaolo SpA to negotiate a $6.8 billion government-backed credit line. If FCA manages to secure the loan, it would become Europe's largest state-guaranteed pandemic-related financing ever given to an automotive manufacturer.
Intesa Sanpaolo is proposing to lead a three-year loan facility for FCA, in order to support its liquidity to withstand the economic effects of the coronavirus pandemic. FCA mentioned in a statement that the Italian export credit agency SACE SpA would guarantee around 80 percent of the amount.
The entire deal will still need to be approved by the country's Finance Ministry. Sources familiar with the matter have revealed that the companies have submitted the financing scheme to regulators. FCA mentioned on Saturday that the financing would go a long way in supporting more than 10,000 small and medium enterprises and thousands of workers in its supply chain in Italy. FCA recently reopening its manufacturing plants in the country late last month after the government slowly lifted restrictions following the decline in new coronavirus cases.
FCA, along with other global automakers, was heavily affected by the spread of the coronavirus pandemic, which had resulted in sharp drops in sales and the temporary shutdown of manufacturing facilities. FCA reportedly burned through more than $5.5 billion during its first quarter this year as a direct result of its crippled sales in markets such as China, Europe, and the US along with the shutdown of its manufacturing plants.
Apart from $6.8 billion credit line, FCA has so far secured close to 20 billion euros in funds through various facilities. Last week, the company reportedly stated that it plans to repay part of its loans through a bond sale worth more than 1 billion euros.
If FCA manages to secure the credit line, it would be the latest addition to the estimated $600 billion that has already been borrowed by companies worldwide since March. Companies in heavily affected sectors such as travel, tourism, hospitality, and retail, have all scrambled to borrow money to bolster their respective balance sheets in order to weather the economic storm.
Among the affected industry, automakers have been one of the most aggressive in taking out loans. Major US auto manufacturers such as Ford and General Motors have already taken out billions of dollars from their existing credit facilities to shore up their finances.
In Europe, Daimler AG recently announced that it has managed to secure a 12 billion-euro credit line, while Renault SA revealed that it was granted a 5 billion-euro loan guarantee by the French government. As of this week, European governments have given out more than 22 billion euros in support of heavily affected companies.
