Chrysler 2011 Annual Report Download - page 215

Consolidated
Financial
Statements
at 31 December
2011
Notes
214
The indenture provides for customary events of default, including but not limited to, (i) non-payment; (ii) breach of covenants in the indenture; (iii) payment
defaults or acceleration of other indebtedness; (iv) a failure to pay certain judgments and (v) certain events of bankruptcy, insolvency and reorganisation. If
certain events of default occur and are continuing, the trustee or the holders of at least 25% in principal amount of the notes outstanding under one of the
series may declare all of the notes of that series to be due and payable immediately, together with accrued interest, if any.
Chrysler’s Secured Senior Notes are secured by liens junior to the Senior Credit Facilities on substantially all of Chrysler Group LLC’s assets and the
assets of its U.S. subsidiary guarantors, including 100% of the equity interests in Chrysler’s U.S. subsidiaries and 65% of the equity interests in its non U.S.
subsidiaries held directly by Chrysler Group LLC and its U.S. subsidiary guarantors.
Borrowing from banks
At 31 December 2011, the item Borrowings from banks includes for €2,333 million a $3 billion term loan (“Tranche B Term Loan”) that is repayable in
quarterly instalments of principal amount of $7.5 million, with the remaining balance of $2,827.5 million due in May 2017.
Medium/Long term committed credit lines (expiring after twelve months) currently available to Fiat Group excluding Chrysler amount to approximately €3
billion at 31 December 2011, of which €2 billion were undrawn. This amount does not include credit lines to fund scheduled investments of the Group’s
operating entities with residual expiry after twelve months, of which €0.5 million was still undrawn at 31 December 2011.
The new €1.95 billion new syndicated credit facility of Fiat contains typical covenants for contracts of this type and size, such as financial covenants (Net
Debt/EBITDA and EBITDA/Net Interest ratios related to industrial activities) and negative pledge, pari passu, cross default and change of control clauses.
The failure to comply with these covenants, in certain cases if not suitably remedied, can lead to the requirement to make early repayment of the outstanding
loans. Similar covenants are contemplated for loans granted by the European Investment Bank for a total of €1.1 billion, in order to fund the Group’s
investments.
In addition the above new syndicated credit facility above, currently contemplates limits to the capability to extend guarantees or loans to Chrysler and make
the increase of Fiat shareholding in Chrysler above the 60% threshold conditional to prior testing of the Net Debt/EBITDA ratio.
At 31 December 2011, Chrysler has secured revolving credit facility (“Revolving Credit Facility”) amounting to $1.3 billion (€1 billion), fully undrawn at that
date and maturing in May 2016.
Chrysler’s senior credit facilities, which include the above mentioned Tranche B Term Facility and the Revolving Credit Facility, are secured by a senior
priority security interest in substantially all of Chrysler Group LLC’s assets and the assets of its U.S. subsidiary guarantors, subject to certain exceptions.
The collateral includes 100% of the equity interests in Chrysler’s U.S. subsidiaries and 65% of the equity interests in its non U.S. subsidiaries held directly
by Chrysler Group LLC and its U.S. subsidiary guarantors.
The senior secured credit agreement includes negative covenants, including but not limited to, (i) limitations on incurrence, repayment and prepayment of
indebtedness; (ii) limitations on incurrence of liens; (iii) the ability to make restricted payments; (iv) limitations on transactions with affiliates, swap agreements
and sale and leaseback transactions; (v) limitations on fundamental changes, including certain asset sales and (vi) restrictions on certain subsidiary
distributions. In addition, the Senior Secured Credit agreement requires Chrysler to maintain a minimum ratio of “borrowing base” to “covered debt” (as
defined in the Facility), as well as a minimum liquidity of $3.0 billion, which includes any undrawn amounts on the Revolving Credit Facility.
The senior secured credit agreement contains a number of events of default related to (i) failure to make payments when due; (ii) failure to comply with
covenants; (iii) breaches of representations and warranties; (iv) certain changes of control; (v) cross−default with certain other debt and hedging agreements
and (vi) the failure to pay certain material judgements.