Chrysler Refinances $4.2 Billion in Debt

Chrysler Group LLC reached an agreement with its lenders late last week to refinance a $2.9 billion loan and $1.3 billion credit line at lower interest rates and less restrictive terms than its existing debt.

The new loan replaces one the company took out in 2011 to repay $6.7 billion in U.S. and Canadian bailout loans.

Chrysler says the new loan will save it $50 million per year on interest rates. That benefit will be partially offset this year by a $30 million fee to lenders.

New credit terms will allow Chrysler to distribute dividends of as much as half its net income, plus a $500 million one-time cash payment. The existing agreement capped the annual dividend at $500 million.

The company's dividend is divided between the company's two shareholders in amounts proportionate to their equity stakes: Fiat SpA (58.5%) and the United Auto Workers union retiree healthcare trust (41.5%).

If Chrysler attains its projected net profit of $2.2 billion this year and chose to make the one-time payment, Fiat could collect a $936 million dividend more than triple the amount it would have gotten under the former loan terms.