DETROIT (Bloomberg) -- Chrysler Group LLC increased the size of a bond offering by $1 billion to $3.5 billion and cut a loan the automaker is seeking to repay debt from the U.S. and Canadian governments, according to people with knowledge of the discussions.
The carmaker reduced the term loan by $1 billion to $2.5 billion, said the people, who declined to be identified because the terms are private. Chrysler also increased the interest rate on the debt to 4.75 percentage points more than the London interbank offered rate from initial guidance of between 4 percentage points to 4.25 percentage points.
Chrysler was marketing as much as $7.5 billion of debt to repay borrowings from its government-funded bailout as Italian partner Fiat SpA seeks to increase its ownership stake. While the automaker may have to pay higher borrowing costs on the loans, shifting the balance toward bonds allows it to take advantage of record low speculative-grade yields.
The yield on junk bonds fell to a record low of 7.19 percent on May 15, according to Bank of America Merrill Lynch. Speculative-grade, or junk, bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
Eileen Wunderlich, a Chrysler spokeswoman, didn’t immediately return a call seeking comment.