Fiat SpA’s share price down, approves a sale of 4 billion euros in new bonds

Fiat SpA made an official statement yesterday, announcing that the companys board authorized the car manufacturer to raise about 4 billion euros (5.4 billion dollars). The company is going to issue new bonds that are considered to provide it with the opportunity to become more flexible and to concentrate on refinancing its 10-billion-euro debt, at a time when it is carrying out the merger with Chrysler.

The company said in its statement, which was cited by Bloomberg: “Such issuances are designed to manage the consolidated debt of the group especially in view of some of the older bond issuances coming due between now and the end of 2015.” As revealed in the official announcement, the board of Fiat SpA also formally signed off the merger of the company and Chrysler into a new entity called Fiat Chrysler Automobiles NV.

According to the statement, released by Fiat, the board of the company permitted a bonds sale in one or several tranches. The sale needs to be carried out until the end of 2015. The money that are to be raised from it are going to be used in order to pay back debt coming due. A similar refinancing plan was approved by the company in 2013.

The boards bond sale authorization comes after last month Fiat unveiled a five-year plan for increasing its production from 4.4 million vehicles manufactured in 2013 to 7 million vehicles. According to the plan, investments of about 48 billion euros will be needed over the five years that are yet to come.

The annual profit goals of the company were confirmed by its Chief Executive Officer Mr. Sergio Marchionne, who on June 13th explained that the growth posted by Fiats Maserati luxury unit compensates for the weakness in slaes reported in the companys second-largest market – Brazil.

Fiat SpA was losing 0.65% to trade at 7.66 euros per share by 8:10 GMT, marking a one year change of +36.7%. According to the information published on the Financial Times, the 23 analysts offering 12 month price targets for Fiat SpA have a median target of 7.00, with a high estimate of 10.50 and a low estimate of 4.00. The median estimate represents a -9.15 % decrease from the last price of 7.71.