Italy approves guarantees for $ 7.1 billion Fiat Chrysler loan

ROME (Reuters) – Italy approved decree offering state guarantees for a € 6.3 billion ($ 7.1 billion) loan to Fiat Chrysler (FCA) FCHA.MI Italian unit, the Treasury said on Wednesday, paving the way for the biggest crisis loan to a European automaker.

The official announcement follows the approval of the country’s court of accounts and ends a lengthy loan approval process, which has drawn criticism in Italy.

By providing state support, Rome “aims to preserve and strengthen the Italian automotive supply chain,” Economy Minister Roberto Gualtieri said in a statement.

FCA’s Italian division has used Rome’s COVID-19 emergency funding programs to secure a state-backed three-year facility to help it weather the crisis triggered by the coronavirus pandemic. The aid will also help the wider Italian automotive sector, in which around 10,000 companies operate.

“100% of the money provided by this facility will be spent on our Italian business… as we continue to transition into a new electric and hybrid powered future,” said Pietro Gorlier, FCA COO for the Europe, the Middle East and Africa.

The loan will be disbursed by Italy’s largest retail bank, Intesa Sanpaolo FAI.MI, which has already authorized it pending the approval of guarantees that the government will provide on 80% of the sum through the export credit agency SACE.

Demand for state support has sparked controversy as FCA works on a merger with French rival PSA PEUP.PA and the holding company of the Italian-American automaker is registered in the Netherlands. FCA’s global brands include Fiat, Jeep, Dodge and Maserati.

Gualtieri said FCA should meet its investment and jobs commitments, but declined to say whether the Treasury has imposed conditions affecting FCA’s planned € 5.5 billion extraordinary dividend, a key of the merger with PSA.

Italian politicians have questioned the dividend, although it should be compatible with the terms of the financing, as it is not due until 2021 and would be paid by the Dutch parent company of FCA Italy, Fiat Chrysler Automobiles NV.

Report by Giuseppe Fonte; additional reporting by Ankit Ajmera in Bangalore; Editing by Alex Richardson, Mark Potter and Maju Samuel

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