Approximately EUR9.1 billion of debt affected
Frankfurt am Main, April 26, 2011 -- Moody's Investors Service has today placed under review for possible
downgrade the Ba1 Corporate Family Ratings (CFR) of Fiat S.p.A.
("Fiat") and its rated subsidiaries Fiat Finance & Trade
and Fiat Finance North America as well as the Ba1 Probability of Default
Rating (PDR) following the announced agreement to increase its stake in
Chrysler Group LLC ("Chrysler") by another 16% to 46%.
The review was triggered by Fiat's announcement on 21 April that
it had reached an Agreement with Chrysler itself and the other members
of Chrysler to purchase an additional 16% stake in Chrysler Group
LLC for a cash payment to Chrysler of USD1,268 million which represents
a significant step in the progressive tighter integration of the two automobile
manufacturers globally. The exercise of this option is conditional
upon the successful refinancing of Chrysler's government loans provided
by the Canadian and US governments. This is expected to be finalised
in the second quarter 2011. Following this transaction Fiat would
own 46% in Chrysler. This stake could go up further to 51%
without additional cash requirements for Fiat if the last performance
event is met.
Issuer: Fiat Finance & Trade Ltd. ,
..On Review for Possible Downgrade:
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
(P)Ba1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Ba1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Ba1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Fiat Finance Canada Ltd. ,
..On Review for Possible Downgrade:
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
(P)Ba1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Fiat Finance North America Inc. ,
..On Review for Possible Downgrade:
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
(P)Ba1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Ba1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Fiat S.p.A. ,
..On Review for Possible Downgrade:
.... Probability of Default Rating,
Placed on Review for Possible Downgrade, currently Ba1
.... Corporate Family Rating, Placed
on Review for Possible Downgrade, currently Ba1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
The review will mainly focus on (i) the intercompany relationship and
future dependency of both companies on each other's performance
following the common use of vehicle architecture and drivetrain technology
as well as a common purchasing organisation and (ii) the potentially increased
exposure of Fiat towards Chrysler that Moody's views as a weaker
credit than Fiat. Moody's will also assess the impact on
Fiat's liquidity profile following the cash outflow of USD1,268
million though the agency recognizes that Fiat has currently significant
cash holdings on its balance sheet.
Fiat's ratings benefit from its leading market positions in Brazil
(with an approximate 25% market share), as the company's
major source of profits and cash flows in the past years. Fiat
Group also benefits from a dominant domestic Italian market presence (with
an approximate 30% market share). The group generates approximately
two thirds of its revenues in these two countries and is therefore especially
vulnerable to a drop-off in demand in either one of these regions.
This very limited geographic diversification, which would improve
with the inclusion of Chrysler in the Group, is a key weakness to
its current rating.
The rating also reflects (i) Fiat's business risk, with a
pure focus on the highly cyclical automotive industry including an increased
46% stake in Chrysler Group and the activities of Magneti Marelli
(automotive components) and Teksid (supplier of engine blocks) as well
as of Comau (robotics for the auto industry) and Fiat Powertrain (mostly
an internal supplier of engines) and (ii) Moody's view of an ageing
product portfolio in Europe resulting from the absence of recent new volume
model launches. This has led to an overall relatively infrequent
model renewal rate compared with its direct peers, thus constraining
the group's competitive position. This was also reflected
in last year's market share losses in Europe and in Fiat's
important home market Italy.
Moody's anticipates that Fiat will be able to contain further market
share losses within the next two years before regaining market shares
in Europe, based on an attractive renewed model range.
The Ba1 rating also takes into consideration a substantial increase in
capital expenditures in the current year and beyond, compared with
a reduced level in 2010, in order to develop and launch attractive
new volume models to the market. Moody's anticipates that
the launch schedule will accelerate from 2012 onwards.
The principal methodologies used in this rating were Global Automobile
Manufacture Industry published in December 2007, and Loss Given
Default for Speculative-Grade Non-Financial Companies in
the U.S., Canada and EMEA published in June 2009.
Please see ratings tab on the issuer/entity page on the Moody's website
for the last rating action and the rating history.
Headquartered in Torino, Italy, Fiat S.p.A.
is one of Italy's leading industrial groups and one of Europe's
largest automotive manufacturers by unit sales. On 01 January 2011,
the group completed the demerger of its capital goods activities,
mainly Iveco and CNH (Ba3,stable), into a separate company,
called Fiat Industrial (Ba1, stable). On a pro-forma
basis, the new Fiat S.p.A. generated consolidated
revenues of EUR35.9 billion and reported a trading profit of EUR
1.1 billion in 2010.
Frankfurt am Main
Falk Frey
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paris
Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places under review for a possible downgrade Fiat's Ba1 ratings;