Chrysler 2003 Annual Report Download - page 101

100 Fiat Group Consolidated Financial Statements at December 31, 2003
Notes to the Consolidated Financial Statements
The facility has a term of three years and expires on September 16, 2005 and is repayable with a new issue of Fiat S.p.A. ordinary
shares. Moreover, Fiat may elect to repay the facility in cash at an earlier date, even partially, every six months, provided that, even
after repayment, its rating is at least equal to investment grade level. Any residual liability for principal will be repaid with Fiat S.p.A.
ordinary shares, which the Banks have agreed to underwrite and offer pre-emptively to all Fiat stockholders. The issue price per share
will be the average of 14.4409 euros (the adjusted value compared to the original value of 15.50 euros in accordance with the rules
established by the AIAF – Italian Association of Financial Analysts – following the Fiat S.p.A. capital increase) and the average stock
market price in the last three or six months, depending on the case, preceding the repayment date. The same formula will also be
applied in the event of an earlier repayment date.
The capital stock increase should be approved at the expiration of the three-year term of the facility, for an amount equal to the
outstanding balance of the facility.
Conditions giving rise to an earlier expiration date of the facility include the occurrence of an event that creates a serious crisis for the
company, such as the request for a court-appointed administrator or other proceedings of composition with creditors, a bankruptcy
filing, or one of the causes of business dissolution set forth in the previous Article 2448 now Article 2484 of the Italian Civil Code.
In addition, the Banks in the facility arrangement have the right to demand early repayment of the entire amount of the facility
and proceed with the conversion of the debt into capital in the following cases:
❚Fiat Group companies have not fulfilled their duty to repay liquid and current financial obligations of an aggregate amount
of more than 1 billion euros;
❚the independent auditors have issued a negative opinion on the consolidated financial statements, unless new auditors,
who must have accepted the assignment within 30 days, issue a favorable opinion no later than 60 days thereafter;
❚Fiat becomes the target of a take-over bid in accordance with Articles 106 and 107 of the Consolidated Law on Financial
Intermediation.
Lastly, the Banks also have the right but not the obligation to demand early repayment of a portion of the amount of the facility, up
to a maximum of 2 billion euros, after 24 months have elapsed from the signing of the agreement (and, therefore, beginning from
July 26, 2004), in the event that the Group’s debt is not rated “investment grade” by at least one of the leading international rating
agencies and, after 18 months have elapsed from the signing of the agreement (January 26, 2004), in the event that the level of net
and/or gross financial indebtedness (respectively in the definitions of “Net financial position” and “Financial payables” used by the
Group and detailed in the Report on Operations) is more than 20% higher than the corresponding level established by the Financial
Objectives stipulated in the facility agreement.
The aforementioned Financial Objectives refer, in particular, to the reduction of net indebtedness in the Net Financial Position to
less than 3 billion euros by the date the Board of Directors approves the 2002 annual financial statements and the maintenance of
that level until the expiration of the facility. Pursuant to the agreement, the proceeds are considered which are generated by the
transactions related to the sale of the investment in Italenergia Bis S.p.A., including those connected with the Citigroup facility of
1,150 million euros, described previously, and the financial effects arising from binding contracts for the sale of assets (investments,
companies, plant and equipment, etc.), comprising those not yet executed. The agreement also states that gross indebtedness must
be reduced by 12 billion euros, compared to March 31, 2002, by the date the Board of Directors approves the 2002 annual financial
statements and must be maintained at less than 23.6 billion euros until the expiration of the facility.
The Group confirms its observance of the Financial Objectives established with the Money Lending Banks in the Mandatory
Convertible facility agreement in terms of reducing the net indebtedness position to 3 billion euros and reducing gross
indebtedness to 23.6 billion euros.
At December 31, 2003, the ratings assigned to the Group by the major rating agencies are the following:
Short-term Medium-term
Moody’s Investors Service (*) Not Prime Ba3
Standard & Poor’s Rating Services (*) B BB-
Fitch Ratings BBB
(*) For purposes of the Mandatory Convertible facility, the most important rating agencies are Standard & Poor’s and Moody’s.
The ratings of the Group represented in the table refer to the non-investment grade category.
Should this condition persist, beginning from July 26, 2004, the Banks will have the right but not the obligation to demand early
repayment of the facility and proceed with the conversion of the debt into capital for an amount of up to 2 billion euros.