Chrysler Auto sets structure, price talk on $7.5 billion term loan ahead of Wednesday launch

By Sara Rosenberg

New York, Nov. 6 - Chrysler Corp. LLC (Chrysler Auto) released details on the structure and price talk on its $7.5 billion first-lien term loan as the deal is getting ready to launch with a bank meeting on Wednesday at 9:30 a.m. ET at the Grand Hyatt in New York, according to a market source.

The single-tranched term loan is being talked at Libor plus 400 basis points, with an original issue discount in the 97½ area, the source said.

The loan is non-callable for one year, then at 104 in year two, 102 in year three and 101 in year four.

The structure on the deal is quite different from how it was documented when it closed back in early August, which is what market sources have been predicting for a while now. One recent rumor had been that the deal could emerge as a $9 billion single tranche-first-lien term loan. As documented, the loan was structured as a $5 billion first-out term loan (Ba3/BB-) and a $5 billion second-out term loan (B3/B).

The deal had originally been brought to market in late June, but was pulled in late July because of market conditions. At the time it was pulled, it was structured as one $10 billion tranche that was guided at Libor plus 375 bps, after flexing up from original talk at launch of Libor plus 325 bps, with call protection of non-callable for one year then at 101 in year two.

The reason that the loan is coming at a smaller size now that it is returning to market is because $2.5 billion of the original $10 billion amount has been repaid using restricted cash on the balance sheet, the source explained.

JPMorgan, Goldman Sachs, Citigroup, Bear Stearns and Morgan Stanley are the bookrunners on the deal, with JPMorgan, Goldman and Citigroup the joint lead arrangers.

Proceeds from the term loan were used to help fund the completed acquisition of a majority interest in the company by Cerberus Capital Management, LP from DaimlerChrysler AG.

In addition, Chrysler Auto also got a $2 billion delayed-draw seven-year second-lien term loan that was funded by Cerberus, which took down $500 million, and DaimlerChrysler, which took down $1.5 billion.

The second-lien term loan is delayed-draw for 12 months and must fund after that time. Originally, the tranche was expected to be funded at close.

The second-lien term loan will definitely not come back for broad syndication for at least a year from close.

Before being taken out of market, the second-lien term loan was being talked at Libor plus 700 bps, up from original talk of Libor plus 600 bps, with call protection of non-callable for one year, then at 103 in year two and 101 in year three.

Chrysler Auto is a producer and seller of Chrysler, Dodge and Jeep vehicles.

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