The multibillionaire car manufacturing giant Fiat Chrysler has decided to expand its business portfolio by issuing convertible bonds of $2.5Billions for a new big investment plan and to reduce its huge debts. The Fiat Chrysler Automobile management has decided to expand its market by investing in the global brands like Maserati, Alpha Romeo, Jeep by an initial investment of $59billion. After this the company wants to further strengthen its position in the global market by taking brands like Volkswagen and BMW.
This the company wants to do to acquire a more dominant position internationally in the increasingly expanding margin market of premium cars. The Chief Executive of FIAT (NYSE:FCAU) Sergio Marchionne who had announced the October bond selling news has also initiated a four day road show with New York investors. Sergio Marchionne is also listing and giving share of the luxury sports car Ferrari for the convertible bonds buying investors, as a part of his 4 billion Euros capital boosting expansion program.
10% of Ferrari bonds are expected to be sold off next year in United States. This has been the best decision made by FIAT (NYSE:FCAU) in 2014 after it got sued and sales were flat for a whole year. The company’s shares jumped by 40%, on Oct 29 only after the announcement of the new plan, and hit their highest numbers in a period of almost 13 years. The company intends to strengthen its position among the big three. By 1746 GMT the company’s stock went up by 3.6% at $13.69.
If according to the market reports the de facto of the bonds and share has been placed already in the market, then purchase of FIAT (NYSE:FCAU) stock is the only option to buy the luxury sports car Ferrari’s stock, and according to a Milan based trader this is exactly what is happening right now in the stock market. The pricing of bond offerings and shares are both scheduled to take place on 10th of DEC after the market closes according to Thomson Reuter reports.
The analysts are expecting the bond pricing to give a yield between 7.125 % and 7.875 % according to IFR. The bond conversion rate includes a premium of 17.5 to 22.5 %. The bonds worth $2.5.million which are scheduled to mature in 2016 is supposed to pay an annual coupon interest and by the options of the underwriters its worth might increase up to $375million. On Thursday according to an announcement made by FIAT (NYSE:FCAU) the company is also expected to increase its common shares by 100million.
The join book running is being carried out by Morgan Stanley, Bofa, Merrill Lynch, Citigroup, UBS, Barclays, Goldman Sachs and JP Morgan. These fund raising activities have calmed the FIAT (NYSE:FCAU) investors to boost its abilities by 60% and reach 7 million cars and increase the overall profit by 2018. The recent sales data of vehicles is also helpful to determine share price rally. But how ever some analysts are still concerned regarding this whole plan and fear the turnover might be harder to deliver.