Chrysler 2012 Annual Report Download - page 198

197
Consolidated
Financial Statements
at 31 December 2012
The bonds issued by Fiat Finance and Trade Ltd S.A. and by Fiat Finance North America Inc. impose covenants on the issuer and, in certain cases, on
Fiat S.p.A. as guarantor, which is standard international practice for similar bonds issued by companies in the same industry sector as the Group. Such
covenants include: (i) negative pledge clauses which require that, in case any security interest upon assets of the issuer and/or Fiat S.p.A. is granted in
connection with other bonds or debt securities having the same ranking, such security should be equally and rateably extended to the outstanding bonds;
(ii) pari passu clauses, under which the bonds rank and will rank pari passu with all other present and future unsubordinated and unsecured obligations of
the issuer and/or Fiat S.p.A.; (iii) periodic disclosure obligations; (iv) cross-default clauses which require immediate repayment of the bonds under certain
events of default on other financial instruments issued by the Group’s main entities; and, (v) other clauses that are generally applicable to securities of a
similar type. A breach of these covenants can lead to the early repayment of the notes. In addition, the agreements for the bonds guaranteed by Fiat S.p.A.
contain clauses which could lead to requirement to make early repayment if there is a change of the controlling shareholder of Fiat S.p.A. which leads to a
resulting downgrading by the ratings agencies.
In addition, the indenture of the Secured Senior Notes issued by Chrysler Group LLC includes negative covenants which limited Chrysler’s ability and,
in certain instances, the ability of certain of its subsidiaries to, (i) pay dividends or make distributions on the Company’s capital stock or repurchase the
Company’s capital stock; (ii) make certain payments; (iii) create certain liens to secure indebtedness; (iv) enter into sale and leaseback transactions; (v)
engage in transactions with affiliates; (vi) merge or consolidate with certain companies and (vii) transfer and sell assets.
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 2012, the item Borrowings from banks includes for €2,265 million (€2,333 million at 31 December 2011) 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 the treasury companies of Fiat Group excluding Chrysler
amount to approximately €2.8 billion at 31 December 2012, of which approximately €2 billion were undrawn. This amount does not include committed
credit lines available to fund scheduled investments of the Fiat Group excluding Chrysler operating entities with residual maturity after twelve months, of
which €1.5 billion was still undrawn at 31 December 2012.
The €1.95 billion 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 syndicated credit facility, 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 2012, Chrysler has secured revolving credit facility (“Revolving Credit Facility”) amounting to approximately €1 billion ($1.3 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.