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Friday, 29 March 2024
Tuesday, 07 Apr 2020 03:00 pm

Hit by coronavirus, Fiat Chrysler, Peugeot seek to boost cash before merger

FCA, whose legal headquarters is in the Netherlands, runs several plants in Italy and may qualify for the government scheme which offers more than 400 billion euros worth of liquidity and bank loans to companies hit by the pandemic, the source said, cautioning no decision had been made.

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With their sales hammered by the coronavirus outbreak, car makers Fiat Chrysler and Peugeot’s owner PSA have postponed their shareholder meetings and are looking at ways to boost cash reserves ahead of their planned merger.

The two car makers have turned to their banks to secure much needed cash, and Fiat Chrysler (FCA) is looking at debt guarantees that the Italian government approved on Monday to support local companies, a source with knowledge of the matter told Reuters.

FCA, whose legal headquarters is in the Netherlands, runs several plants in Italy and may qualify for the government scheme which offers more than 400 billion euros worth of liquidity and bank loans to companies hit by the pandemic, the source said, cautioning no decision had been made.

A spokesman for FCA declined to comment.

The crisis triggered by the virus has virtually erased demand for new vehicles, pushing automakers to temporarily halt most production.

In late March FCA secured a 3.5 billion euro credit line, with an initial 12-month term that can be extended six months. This added to existing credit facilities worth 7.7 billion euros.

The Italo-American firm, chaired by John Elkann, scion of the Italian Agnelli family, would need to cut its ordinary dividend if it decides to pursue state aid from Italy.

The emergency decree says companies looking to apply for Italy-backed loans must refrain from approving dividend payments for a year.

FCA’s decision to postpone the shareholders’ meeting to late June has analysts speculating that its ordinary dividend worth 1.1 billion euros could be axed or postponed.

“While the merger process is proceeding, the postponement of the AGM will raise markets’ concerns of a potential cancellation of the ordinary dividend,” said Intesa Sanpaolo analyst Monica Bosio.

Equita analyst Martino De Ambroggi echoed that the most likely scenario was “the cancellation or at least the postponement of the ordinary dividend for both FCA and PSA.”

PSA, which proposed a similar 1.1 billion euro dividend, also decided to postpone its annual shareholders’ meeting to June 25. But the company is not expected to tap state funding, another source close to the company said.

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Neha Pandey

Aware of her elements, Neha writes the best articles across industries including electronics & semiconductors, automotive & transportation and food & beverages. Being from the finance background she has the ability to understand the dynamics of every industry and analyze the news updates to form insightful articles. Neha is an energetic person interested in music, travel, and entertainment. Since past 5 years, she written extensively on sectors like technology, finance and healthcare.


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