Moody’s to Review Fiat Debt for Possible Downgrade

Moody's Investors Service is reviewing Fiat SpA's debt rating for possible downgrade because it says the Italian carmaker's impending acquisition of 100% of Chrysler Group LLC will "materially weaken" the company's liquidity.

Fiat is expected by Jan. 20 buy the 41.5% of Chrysler it doesn't already own. The deal will give $4.35 billion to the United Auto Workers union healthcare trust that currently owns the stake.

Fiat has agreed to pay $1.75 billion, plus $700 million in four equal annual installments the first of which is due when the sale closes. Chrysler will contribute $1.9 billion in the form of a special dividend.

Moody's points out that Fiat's current cash flow is negative. The rating service emphasizes that the carmaker has enough cash, unused credit facilities and operating cash flow to meet its expected cash needs this year.

Moody's says its review of Fiat's current Ba3 debt rating will look at how the Chrysler acquisition will affect Fiat's liquidity over the next 12-18 months.