Fiat $2.2 billion exchangeables into GM talked at 2.75-3.5% yield, up 38.14%

By Ronda Fears

Nashville, Tenn., Dec. 10 - Fiat Finance Luxembourg SA launched $2.2 billion of exchangeable notes which convert into General Motors Corp. common stock, with pricing guidance that puts the issue pricing to yield 2.75% to 3.5% and a 38.14% initial conversion premium. Merrill Lynch & Co. is lead manager of the Rule 144A deal, which is expected to price Tuesday.

The five-year issue will be non-callable for three years, and will be guaranteed by Fiat SpA. The issue also will have contingent conversion and contingent payment features, according to a market source, but the trigger thresholds were not available.

Fiat said the offering will allow it to obtain lower cost financing that will enable Fiat Group to reduce its utilization of existing credit facilities and repay other debt with the net proceeds of this offering.

It also will diversify the company's sources of funding by targeting a broader base of institutional investors than typically subscribe to the Fiat Group's debt issuances, the company said. Fiat also said it would lengthen the debt maturities, thereby contributing to the liquidity of the Fiat Group, and reducing the Fiat Group's net debt by up to $2.2 billion if the exchange option is fully exercised for shares.

The offering does not have any impact on the on-going cooperation programs, operational integration initiatives and efforts to achieve synergies between the Fiat Group and General Motors, Fiat said, which is expected to develop further in the coming months.

General Motor common shares closed Monday down $1.25 to $50.34.

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