P&A Providers & Administrators
MenuMENU
SearchSEARCH

Chrysler Seeks $3.5 Billion in Largest High-Yield Bond Offering Since 2009

May 18, 2011
3 min to read


Chrysler Group LLC is turning to the bond market for the biggest high-yield offering in two years after lenders pushed back against the automaker’s proposed loan.


The company cut a $3.5 billion term loan by $1 billion and increased the bond offering by that amount to $3.5 billion, according to people with knowledge of the discussions. Auburn Hills, Michigan-based Chrysler, run by Fiat SpA, also had to raise interest rates on the six-year loan, the people said.

Ad Loading...


"The loan deal simply wasn't going very well," said Marc Gross, a money manager in New York at RS Investments who helps oversee $3 billion in fixed-income funds. The changes "should stabilize the deal."


Chrysler was marketing as much as $7.5 billion of debt to repay borrowings from the U.S. and Canadian governments, which provided financing in 2009 to prevent the company's collapse. While the automaker will have to pay higher interest rates on the notes than the proposed loans, shifting the balance toward bonds allows it to take advantage of record low speculative- grade yields and obtain longer maturities.


Eileen Wunderlich, a Chrysler spokeswoman, declined to comment.


The bond offering is split between eight- and 10-year notes that may price as soon as May 19, said the people, who declined to be identified because terms aren't set. The eight-year securities may yield 7.75 percent to 8 percent and the 10-year notes may offer an additional 25 basis point premium above that, the people said.


The average B rated bond yields 7.36 percent, Bank of America Merrill Lynch index data show. The average absolute yield on junk bonds fell to a record low of 7.19 percent yesterday from 7.85 percent at year end.

Ad Loading...


The offering "is going very well on the bond side," Gross said. "It's above market yield. If you're buying the turnaround story and you don't think the collateral pool's great, you'd rather just be in the bonds, which has better carry and upside."


Speculative-grade, or junk, bonds are rated below Baa3 by Moody's Investors Service and lower than BBB- by Standard & Poor's. Moody's assigns a B2 rating to Chrysler and S&P grades it a step higher at B+, according to notes from the credit- rating companies.


The company increased the rate it will pay for its $2.5 billion term loan to 4.75 percentage points more than the London interbank offered rate from initial guidance of between 4 percentage points to 4.25 percentage points, the people said.


The term loan will have a floor on the benchmark of 1.25 percent to 1.5 percent and be sold at a discount of 99 cents on the dollar. Three-month Libor, the rate banks charge to lend to each other, was set today at 0.26 percent.


Chrysler was also seeking a $1.5 billion revolving line of credit, the people said.

Ad Loading...


Morgan Stanley is arranging the term loan, Bank of America Corp. is managing the bond offering and Citigroup Inc. is leading the credit line. Goldman Sachs Group Inc. is also helping arrange the deal, the people said.


The $3.5 billion junk-bond offering will be the biggest sale since Teck Resources Ltd., the Vancouver-based metals producer, sold $4.23 billion of bonds in May 2009, according to data compiled by Bloomberg.

More Industry

Photo of gray SUV plugged into public electric-vehicle charger in parking lot
Industryby Hannah MitchellJuly 21, 2026

World EV Adoption Set to Grow

A new report says the segment, despite recent setbacks in some regions, is poised for acceleration as many countries look to reduce pollution.

Read More →
Bar chart of truck and SUV segments' weekly value change
Industryby StaffJuly 21, 2026

Black Book: Weekly Market Update

Wholesale automotive auction business stayed steady last week as bidders encountered lower prices, analysts observed.

Read More →
laptop with blue car on screen on a shopping website, Clear Costs Convert
Industryby Lauren LawrenceJuly 21, 2026

Pricing Transparency Drives Purchase Consideration

An annual study by JD Power found that clear pricing matters to consumers on automaker websites, so much so that it increases their purchase consideration.

Read More →
Ad Loading...
Bar graphic of used-car segment weekly change
Industryby StaffJuly 14, 2026

Black Book: Weekly Market Update

Used-vehicle market depreciation was the prevailing story in the wholesale market last week.

Read More →
Light-blue Fiat car parked on a sunny Chicago street
Industryby Hannah MitchellJuly 14, 2026

Smaller Is Looking Better

A growing number of Americans in the market for a new vehicle are opting for more affordable options, not waiting for market stability to bite the bullet.

Read More →
man sitting at desk using calculator with charts in front of him, to-go coffee cup on desk, rising and falling data chart in front
Industryby Lauren LawrenceJuly 14, 2026

U.S. EV Market Slowly Stabilizes

U.S. electric-vehicle interest is slowly stabilizing since a major dip in sales after last year's end of the federal EV tax credit, and hybrids remain the leading electrified power train.

Read More →
Ad Loading...
blue background, map of the world with connecting lights and an electric vehicle emblem in the middle
Industryby Lauren LawrenceJuly 8, 2026

Global EV Market Entering New Phase

Automakers are making investments to lower battery costs and optimize production to meet changing consumer needs.

Read More →
Bar chart showing week-over-week wholesale automotive price change
Industryby StaffJuly 7, 2026

Black Book Weekly Market Update

The holiday weekend, not surprisingly, put a drag on wholesale automotive activity last week, analysts observed.

Read More →
Photo of Honda CR-V SUV on two-lane road next to roadside trees
Industryby Hannah MitchellJuly 1, 2026

Auto Affordability in Context

Cox Automotive points out the complex circumstances that have led to eye-popping vehicle prices.

Read More →
Ad Loading...
Line chart of used-vehicle days to turn over past week
Industryby StaffJune 30, 2026

Black Book: Weekly Market Update

Automotive auction inventory increased last week, giving choosy bidders even more leeway.

Read More →