Fiat Seeks New 1.8 Bln-Euro Loan

A rescue plan for Fiat will include a new two billion-euro syndicated loan from banks as well as a 1.8 billion-euro capital increase to be completed as early as July, newspaper Il Sole 24 Ore reported today.

Il Sole, Italy's leading financial daily, said the plan would also extend until 2008 a three billion-euro convertible loan offered by creditor banks to the loss-making industrial group last year. Fiat declined to comment on the report.

The financial daily said the plan was backed by two leading creditors, Banca Intesa and UniCredito, which were pressing the six other banks to agree by Thursday. That is when Fiat Chief Executive Giuseppe Morchio will unveil the turnaround plan that is expected to axe as many as 12,000 jobs, most outside Italy.

Late on Monday, Fiat-owned farm equipment-maker CNH Global NV confirmed it would be included in the restructuring.

Fiat shares were down 3.1 percent at 6.71 euros at 0730 GMT, compared with a flat DJ Stoxx index of European auto stocks. Fiat has underperformed the index by 16 percent this year having halved in value in 2002 as falling car sales tipped the group into a loss.

"What's new in the press is the two billion-euro loan. People have been expecting a capital increase of about two billion euros but another two billion euros from the loan shows Fiat's borrowing requirements are bigger than thought," said an analyst in Milan who asked not to be named.

A trader said hedge funds were selling Fiat heavily and the stock would be volatile until Thursday's announcement. Other Italian newspapers on Tuesday said Fiat's creditor banks were still wary of the plan.

Financial daily MF said of the eight banks, only UniCredito was in favour of a 2.0 billion-euro capital increase for Fiat plus a new loan worth the same amount in return for changes to the terms of the 2002 convertible loan.

Fiat, owners of the Ferrari marque and Formula One team, had offered a discount of three euros per share on the strike price of the convertible loan as well as its extension to 2008 from its current expiry date in 2005, it said.

But the banks were holding out for a complete revision of the loan's terms and also insisting that the Agnelli family, which founded Fiat and whose members remain its controlling shareholders, should contribute more cash to the plan, MF said.

Il Sole said the planned share issue would be underwritten by creditor banks plus Citicorp and Merrill Lynch, and the new loan would be priced at 150 basis points over the interbank rate, or 4.5 to 5.0 percent.