10.05.2011 SEC FILINGS REVEAL FIAT CAN TAKE ITS STAKE IN CHRYSLER GROUP TO OVER 70 PERCENT

JEEP PATRIOT 2011

In a filing submitted to the U.S. Securities and Exchange Commission (SEC) yesterday it was revealled that Fiat can actually boost its stake in the Chrysler Group to more than 70 percent through exercising a range of further options. Fiat has the option of buying the U.S. Treasury Department's stake in the Chrysler Group within 12 months of repaying loans (which are scheduled to be repaid next month) and can also pick up several tranches of the union's healthcare trust fund stake which is managed through VEBA.

"Fiat may acquire additional membership interests, at any time and from time to time, including through the exercise of options it holds on certain membership interests held by the U.S. Treasury and the VEBA Trust," read the statement submitted by the Chrysler Group to the SEC yesterday. "If Fiat exercised these options in full [...] its ownership could exceed 70 percent."

Fiat currently holds a 30 percent stake in the Chrysler Group (made up of the 20 percent initial stake it was given when the U.S. carmaker emerged from the Chapter 11 process two years ago plus two further 5 percent increments that have been successfully triggered). At the end of last month the Chrysler Group announced a timetable to repay U.S. and Canadian government debt and this "Incremental Equity Call Option", which is set to be exercised at a price of US$1,268 million, will be closed by the end of June and will in turn raise Fiat's stake by a further 16 percent. A further 5 percent tranche, that Fiat has already indicated will be completed during the course of this year, will bring its total stake (once the loans are repaid) to 51 percent.

Yesterday's SEC filing added two further options for Fiat to raise its stake in the Chrysler Group further upwards from 51 percent, and potentially to more than 70 percent. The first option regards the U.S. Treasury's stake, the filing saying: "The U.S. Treasury has granted Fiat a call option [...] held by U.S. Treasury. This call option has the same post-IPO pricing terms as the call option under the LLC Operating Agreement. The pre-IPO option price is to be a negotiated price or, absent agreement, a price established by the average of the closest estimated values determined by two of three investment banks. This option is exercisable during the 12-month period following the repayment in full of the U.S. Treasury loans."

The second option to raise shareholding concerns the union's healthcare trust, VEBA. The entry submitted to the SEC sstates: "The VEBA Trust has granted Fiat a call option on a portion of the [...] interests held by the VEBA Trust. This call option has the same pricing terms as the call option under the LLC Operating Agreement. It is exercisable from July 1, 2012 to June 30, 2016 provided that it covers 40 percent of the membership interests originally issued to the VEBA Trust and may be exercised for no more than 8 percent of such membership interests in any six month period."

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