Chrysler 2013 Annual Report Download - page 212

211
Consolidated
Financial Statements
at 31 December 2013
The €2.1 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 and research and development costs. In addition, the above syndicated credit facility,
currently contemplates limits to the capability to extend guarantees or loans to Chrysler.
At 31 December 2013, Chrysler has secured revolving credit facility (“Revolving Credit Facility”) amounting to approximately €0.9 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.
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) limitations on making certain 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 judgments.
Payables represented by securities
At 31 December 2013, the item Payables represented by securities includes the VEBA Trust Note of €3,575 million (€3,863 million at 31
December 2012), which represents Chrysler’s financial liability to the International Union, United Automobile, Aerospace, and Agricultural
Implement Workers of America (“UAW”) Retiree Medical Benefits Trust (“VEBA Trust”) having a carrying value of $4,715 million (€3,419 million).
This financial liability was recognized by Chrysler in connection with the settlement of obligations related to postretirement healthcare benefits
for certain UAW retirees. The VEBA Trust Note has an implied interest rate of 9.0% and requires annual payments of principal and interest
through 15 July 2023. On 7 February 2014, Chrysler repaid the VEBA Trust Note through the issuance of secured senior notes for $3 billion
and senior secured credit facilities for $2 billion (as described in Note 39 – Subsequent events) .
At 31 December 2013, Chrysler’s Payables represented by securities also includes the Canadian Health Care Trust Notes totaling €703 million
(€864 million at 31 December 2012), which represents Chrysler’s financial liability to the Canadian Health Care Trust arising from the settlement
of postretirement health care benefits for represented employees, retirees and dependants of Chrysler Canada Inc.’s National Automobile,
Aerospace, Transportation and General Workers Union of Canada (“CAW”). These notes were issued in four tranches maturing up to 2024.