Fiat Chrysler meets US investors after launching bond, share offers

By Reuters

Dec 06, 2014 09:18 PM EST

Fiat Chrysler Automobiles (FCA) (FCHA.MI) (FCAU.N) began meeting U.S. investors on Friday after launching a $2.5 billion convertible bond issue and a share sale to reduce its debt pile and fund an ambitious investment plan.

The newly created FCA, which moved its primary share listing to New York in October, wants to invest 48 billion euros ($59 billion) over five years to turn Jeep, Maserati and Alfa Romeo into global brands. The company hopes to take on Volkswagen (VOWG_p.DE) and BMW (BMWG.DE) by strengthening its position in the fast-growing and high-margin market for premium cars.

FCA Chief Executive Sergio Marchionne, who announced the share and bond offers in October and launched them on Thursday, kicked off a four-day roadshow with investors in New York, bankers said.

As part of a capital-boosting plan worth a total of 4 billion euros, Marchionne is also spinning off and listing Ferrari, giving shares in the iconic luxury sportscar maker to Fiat shareholders and investors who buy the convertible bond.

Ten percent of Ferrari will be sold in a public offering next year in the United States. [ID:nL5N0SO536]

FCA's shares have risen more than 40 percent since the plan was announced on Oct. 29 and hit their highest in 13 years this week on expectations that the bond issue would be fully covered given the sweetener of the Ferrari shares, traders said.

The stock was up 3.6 percent at $13.69 by 1746 GMT.

"If, as the market believes, the bond and shares have de-facto already been placed, then the only way to get Ferrari shares is to buy FCA stock and that's what is happening," one Milan-based trader said.

Both the share sale and bond offering will be priced after the market closes on Dec. 10, according to IFR, a Thomson Reuters publication.

The bond is expected to be priced to give a yield of between 7.125 percent and 7.875 percent, IFR said, while the rate at which it will be converted into shares is seen including a premium in the range of 17.5-22.5 percent.

The $2.5 billion bond, which matures in 2016, is expected to pay an annual coupon and may be increased by up to $375 million at the option of the underwriters.

FCA said in a statement on Thursday it would also offer up to 100 million common shares.

J.P. Morgan, Goldman Sachs, Barclays, UBS, Citigroup, BofA Merrill Lynch and Morgan Stanley are acting as joint bookrunning managers for both offerings.

FCA's controlling investor Exor (EXOR.MI), the holding company of the Agnelli family that founded Fiat, said in a separate statement on Thursday it would participate in the bond issue to avoid dilution of its FCA stake of around 31 percent.

The capital raising moves have calmed some worries about FCA's ability to fund a plan to boost sales by 60 percent to 7 million cars and raise net profit five-fold by 2018, and recent vehicle sales data have contributed to the share price rally.

But some analysts remain concerned the jump may have been overdone and that FCA's turnaround plan will be hard to deliver.

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