Chrysler repays $1.9B loan

The amount has been paid as a payment towards the $4 billion loan that the "Old Chrysler" automobile company had availed of to keep its head above the water in testing economic conditions.

More than expected
The repayment may well be less than the face value of the loan; however it is considerably higher that what the Treasury expected to recover on this loan.

The amount repaid by Chrysler is also more than what investment banking firm Keefe, Bruyette and Woods, hired by the Treasury, valued the loan transaction to be worth.

The Treasury has indicated that it will accept the amount as full payment as it announced Monday that Chrysler Holding and Chrysler Financial, the auto financing arm of the company, no longer have outstanding obligations towards the $700 billion TARP fund.

This loan in question, which the Treasury had lent to the carmaker on Jan. 2, 2009, went into default when the “Old Chrysler,” filed for bankruptcy in April 2009.

The taxpayer’s money was utilized to bail out two of the three Detroit auto behemoths. While Chrysler and GM received a combined sum of $85 billion as bailout funds from the federal government, Ford managed to face the economic depression.

Upon the sale of assets of Old Chrysler, the said loan was reduced by $500 million as "New Chrysler" assumed that amount of the debt.

The uncertainty surrounding the quantum and timing of any income distributions by Chrysler Financial led the Treasury to believe that a material recovery on the loan was a remote possibility.

Chrysler Holding, the parent company of the old Chrysler, is owned by private equity firm Cerberus Capital Management. The latter had bought Chrysler from Daimler AG in 2007.

Recovery from IPOs
The taxpayer’s money was utilized to bail out two of the three Detroit auto behemoths. While Chrysler and GM received a combined sum of $85 billion as bailout funds from the federal government, Ford managed to face the economic depression.

The Congressional Budget Office (CBO), in the month of March, estimated that the government would approximately recover $51 billion of the said aid and would have to write off $34 billion of that amount as non recoverable.

As on date, the U.S. government owns over 60 percent of GM, and 10 percent of Chrysler.

The future initial public stock offerings of the automakers are likely to help the Treasury recover majority of this aid. The GM IPO is expected in late 2010 while that of Chrysler in 2011.