Fiat prepares to meet banks
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MILAN, Italy (Reuters) -- Fiat will talk through its finances with creditor banks next week, financial sources say, while German partner Opel has said again it does not plan to merge with the Italian carmaker.
The sources said Fiat's Chief Financial Officer would spend November 27 meeting the eight banks that last year gave the industrial group a three billion euro ($3.6 billion) loan to fund a do-or-die restructuring.
The loan, which expires in 2005, can be converted into Fiat shares if debt-related targets are not met, and there has been speculation that the banks, which are eager not to end up with a stake in Fiat, could seek to change the terms.
"The meeting is at a technical level and has been planned for some time," one of the sources said. "So there will be no discussion of a revision of the loan but rather an update on how the accounts are going and Fiat's borrowing requirements."
Fiat's banks are Capitalia, Intesa, Sanpaolo IMI, UniCredito, Banca Nazionale del Lavoro, Monte dei Paschi di Siena, ABN AMRO and BNP Paribas.
The banks already have the right to convert into equity after Fiat failed to cut its net debt below 3.6 billion euros by the end of last year as agreed and after it was cut to non-investment grade by the three main debt ratings agencies.
But if they converted, the banks would have to buy Fiat stock well above Wednesday's market price of 6.39 euros, because the strike price, revised earlier this year, is mid-way between 14.44 euros and a three-month weighted average share price.
Last year, as Fiat struggled through its worst crisis, sources said the banks felt reassured by a deal that allows Fiat to sell its core car unit Fiat Auto to General Motors.
GM bought 20 percent of Fiat Auto in 2000 and agreed to buy the rest from 2004. But the U.S. giant now says that the moves Fiat has taken to revive Fiat Auto have rendered the agreed "put" option invalid. While they argue, the option has been delayed to 2005.
Analysts have said the spat makes it less likely GM and Fiat will deepen links, which already include developing powertrains and buying parts together.
Late on Tuesday the head of GM's German arm Opel reiterated there were no plans to merge with Fiat Auto at the moment but that the joint ventures with Fiat, which are crucial to GM's loss-making European operations, were going well.
"A merger is not currently on the horizon," Opel Chief Executive Officer Carl-Peter Forster told reporters.
"Fiat is an important partner for us. We already manage 70-75 percent of the overall cost of a car together," he said, but declined to say whether the groups would extend their ventures beyond the small Corsa and Punto models.
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Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
