Banks to Take Fiat Stake

Fiat's creditor banks look set to overtake the Agnelli family as the carmaker's top shareholder group, but analysts expect no resulting shift in the company's turnaround strategy, nor its effective control

Banks to Take Fiat Stake

A 3 billion euro ($3.9 billion) convertible loan, offered in 2002 to help the industrial group survive a slump in sales, comes due in September. At that point, the eight lender banks will take on 26 or 27 percent of Fiat, which is still mired deep in losses.

The banks as a block would then hold more of the company than would the Agnelli-led Ifil holding company, whose stake would be diluted to 22 percent once the new shares are issued.

But analysts and sources dismiss the idea that the banks may act in a unified way to force management into strategy changes.

"As I understand it, the banks very much regard these as trading shares and will eventually try to unload them," one analyst said.

After a three-hour meeting on Tuesday, the chief executives of Fiat and leading Italian creditors Banca Intesa, Capitalia, Sanpaolo IMI and UniCredito moved to kill speculation about a renegotiation of the loan.

"The conversion of the mandatory convertible facility, due in September 2005, was confirmed," they said in a brief joint statement.

The banks will continue to support the group as it focuses on a three-year turnaround plan, the statement also said.

The statement showed that the banks, which stand to incur losses at conversion, would make no attempt to negotiate a lengthening of the loan, a financial source in Milan said.

"There doesn't seem to be any chance of the convertible loan now being changed," the source said. "Some of the banks may decide to sell their shares; some of them may decide to keep them. But they won't get together to run the company. They will do their own thing."

The banks are on the wrong end of the deal, because under the terms of the loan, the valuation of the Fiat shares they will get will be double their current market worth, showing how far the carmaker's stock has fallen since 2002.

The stock last week hit an all-time low of 4.39 euros. It has recovered since then and was trading at 5.11 euros at 1240 on Wednesday, down 0.9 percent on the day. Creditor banks have steadily written down the value of the loan, softening the immediate impact of the conversion.

Analysts at Exane BNP Paribas said a deal with the banks would allow Fiat Chief Executive Sergio Marchionne to press on with attempts to make the century-old company profitable again.

Marchionne earlier this year resolved another key issue for Fiat, winning a $2 billion settlement from General Motors Corp to end their fractious alliance.

But with GM and other sector giants struggling to sell cars in the face of slow demand and fierce competition, the recovery road for Fiat still looks like a steep climb.

"Fiat remains a risky story as the turnaround of the auto business is not yet achieved and is taking place in quite a difficult environment," BNP Paribas said in its note.

As well as the big four Italian banks, the banks which made the 2002 loan to Fiat were Banca Monte dei Paschi di Siena , Banca Nazionale del Lavoro, BNP Paribas and ABN AMRO.

shares
comments
Sato Goes Quickest at Mugello

Previous article

Sato Goes Quickest at Mugello

Next article

Massa Made Coulthard Furious at Imola

Massa Made Coulthard Furious at Imola
Load comments

About this article

Series Formula 1
Author William Schomberg
The 'new' F1 drivers who need to improve at Imola Plus

The 'new' F1 drivers who need to improve at Imola

After a pandemic-hit winter of seat-swapping, F1 kicked off its season with several new faces in town, other drivers adapting to new environments, and one making a much-anticipated comeback. BEN ANDERSON looks at who made the most of their opportunity and who needs to try harder…

The delay that quashed Aston Martin’s last F1 venture Plus

The delay that quashed Aston Martin’s last F1 venture

Aston Martin’s only previous foray into Formula 1 in the late 1950s was a short-lived and unsuccessful affair. But it could have been so different, says NIGEL ROEBUCK

Formula 1
Apr 10, 2021
Verstappen exclusive: Why lack of car-racing titles won't hurt Red Bull's ace Plus

Verstappen exclusive: Why lack of car-racing titles won't hurt Red Bull's ace

Max Verstappen’s star quality in Formula 1 is clear. Now equipped with a Red Bull car that is, right now, the world title favourite and the experience to support his talent, could 2021 be the Dutchman’s year to topple the dominant force of Lewis Hamilton and Mercedes?

Formula 1
Apr 9, 2021
Are we at peak F1 right now? Plus

Are we at peak F1 right now?

For many, many years Formula 1 has strived to do and to be better on all fronts. With close competition, a growing fanbase, a stable political landscape and rules in place to encourage sustainability, 2021 is on course to provide an unexpected peak

Formula 1
Apr 8, 2021
How crucial marginal calls will decide the Red Bull vs Mercedes battle in F1 2021 Plus

How crucial marginal calls will decide the Red Bull vs Mercedes battle in F1 2021

The longer Red Bull can maintain a performance edge over Mercedes, the better the odds will be in the team’s favour against the defending world champions. But as the Bahrain Grand Prix showed, many more factors will be critical in the outcome of the 2021 Formula 1 World Championship

Formula 1
Apr 7, 2021
How Williams’ new structure adheres to a growing F1 trend Plus

How Williams’ new structure adheres to a growing F1 trend

Williams held out against the tide for many years but, as MARK GALLAGHER explains, the age of the owner-manager is long gone

Formula 1
Apr 6, 2021
When a journeyman driver's F1 career lasted just 800m Plus

When a journeyman driver's F1 career lasted just 800m

Nikita Mazepin’s Formula 1 debut at the Bahrain Grand Prix lasted mere corners before he wiped himself out in a shunt, but his financial backing affords him a full season. Back in 1993 though, Marco Apicella was an F1 driver for just 800m before a first corner fracas ended his career. Here’s the story of his very short time at motorsport’s pinnacle

Formula 1
Apr 4, 2021
The nightmare timing that now hinders Mercedes Plus

The nightmare timing that now hinders Mercedes

Mercedes and Lewis Hamilton took victory at the Bahrain Grand Prix despite, for a change, not having the quickest car. But any hopes of developing its W12 to surpass Red Bull's RB16B in terms of outright speed could not have come at a worse time.

Formula 1
Apr 2, 2021