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
The other McLaren exile hoping to follow Perez's path to a top F1 seat Plus

The other McLaren exile hoping to follow Perez's path to a top F1 seat

After being ditched by McLaren earlier in his F1 career Sergio Perez fought his way back into a seat with a leading team. BEN EDWARDS thinks the same could be happening to another member of the current grid

How studying Schumacher helped make Coulthard a McLaren F1 mainstay Plus

How studying Schumacher helped make Coulthard a McLaren F1 mainstay

Winner of 13 grands prix including Monaco and survivor of a life-changing plane crash, David Coulthard could be forgiven for having eased into a quiet retirement – but, as MARK GALLAGHER explains, in fact he’s busier than ever, running an award-winning media company and championing diversity in motor racing. Not bad for someone who, by his own admission, wasn’t quite the fastest driver of his generation…

Formula 1
Aug 7, 2022
Could F1 move to a future beyond carbonfibre? Plus

Could F1 move to a future beyond carbonfibre?

Formula 1 has ambitious goals for improving its carbon footprint, but could this include banishing its favoured composite material? PAT SYMONDS considers the alternatives to carbonfibre and what use, if any, those materials have in a Formula 1 setting

Formula 1
Aug 6, 2022
How Russell has proven he deserves to be Hamilton's Mercedes heir Plus

How Russell has proven he deserves to be Hamilton's Mercedes heir

He’s fast, he’s smart, and he’s already shown he’s not going to let Max Verstappen intimidate him. George Russell won’t say it, but LUKE SMITH says he’s ready to take the lead at Mercedes when Lewis Hamilton moves on to a quieter life. And – whisper it – Mercedes and Lewis are starting to think so too

Formula 1
Aug 5, 2022
The traits that fuelled Alonso's unexpected Aston Martin move Plus

The traits that fuelled Alonso's unexpected Aston Martin move

Fernando Alonso’s bombshell switch to Aston Martin sent shockwaves through Formula 1, not least at Alpine that finds itself tangled in a contract standoff with Oscar Piastri. Not shy of a bold career move and with a CV punctuated by them, there were numerous hints that trouble was brewing

Formula 1
Aug 4, 2022
The elements Ferrari must resolve to first save face, then win championships Plus

The elements Ferrari must resolve to first save face, then win championships

OPINION: Ferrari's Formula 1 title hopes look all but over after another strategic blunder in last week's Hungarian Grand Prix denied Charles Leclerc the chance to fight for victory, while handing it to chief rival Max Verstappen. The Scuderia now faces intense scrutiny over what it must now do to finally become a genuine factor in championship battles

Formula 1
Aug 3, 2022
The clues about Hamilton’s F1 retirement plans revealed after Vettel’s decision Plus

The clues about Hamilton’s F1 retirement plans revealed after Vettel’s decision

OPINION: Sebastian Vettel is set to leave Formula 1 at the end of 2022 and will, rather shockingly, be replaced by Fernando Alonso at Aston Martin. But what about the final chapter of the other driver that defined the post-Michael Schumacher era? In Hungary, Lewis Hamilton spoke about his future in the context of Vettel’s upcoming departure, which offered clues on how long it will last

Formula 1
Aug 2, 2022
Why all signs point to F1’s Monaco special relationship continuing Plus

Why all signs point to F1’s Monaco special relationship continuing

OPINION: With more potential venues than there are slots in future calendars, rumours have been circulating that the Monaco Grand Prix could be a casualty of F1’s expansion into new markets. But MARK GALLAGHER thinks this is highly unlikely

Formula 1
Aug 2, 2022