27. Debt

Breakdown of debt by category and by maturity is as follows:

 At 31 December 2013At 31 December 2012
(€ million)due within
one year
due
between
one and
five years
due
beyond
five years 
Totaldue within
one year 
due
between
one and 
five years
due beyond
five years
Total
Asset-backed financing 586 10 - 596 436 13 - 449
                 
Bonds 2,572 8,317 3,577 14,466 1,389 8,295 3,032 12,716
Borrowings from banks 2,436 5,609 607 8,652 2,489 5,084 566 8,139
Payables represented by securities 554 1,374 2,604 4,532 516 1,22 3,137 4,873
Other  990 348 318 1,656 981 352 379 1,712
Total Other debt 6,552 15,648 7,106 29,306 5,375 14,951 7,114 27,44
Total Debt 7,138 15,658 7,106 29,902 5,811 14,964 7,114 27,889

At 31 December 2013, Debt includes €9,458 million (€10,312 million at 31 December 2012) of Chrysler debt due to third parties.

Debt increased by €2,013 million at 31 December 2013. Net of foreign exchange translation effects and scope of consolidation, the increase in Debt was €3,092 million: the Group issued new bonds for €2,866 million during the year and repaid bonds on maturity for €1,000 million; during the year, medium and long-term loans obtained by the Group amounted to €2,593 million while medium and long-term borrowings repayments amounted to €1,954 million(1).

Asset-backed financing represents the amount of financing received through factoring transactions which do not meet IAS 39 derecognition requirements and is recognized as an asset in the Statement of financial position under Current receivables and other current assets (Note 18). Asset-backed financing increased by €147 million in 2013.

The annual effective interest rates and the nominal currencies of debt at 31 December 2013 are as follows:

 Interest rate 
(€ million)less
than 5%
from 5%
to 7.5%
from 7.5%
to 10%
from 10
to 12.5%
greater
than 12.5%
Total at 31 December 2013
Euro  5,043 7,412 2,253 90 - 14,798
US Dollar 2,962 122 5,744 12 169 9,009
Brazilian Real 1,271 431 256 1,19 - 3,148
Swiss Franc 378 672 - - - 1,05
Canadian Dollar 39 79 584 - - 702
Mexican Peso - - 414 - - 414
Chinese Renminbi 2 292 66 - - 360
Polish Zloty 141 15 - 10 - 166
British Pound 116 - - - - 116
Argentine Peso - - 33 - 64 97
Other 33 2 3 - 4 42
Total Debt 9,985 9,025 9,353 1,302 237 29,902

For further information on the management of interest rate and currency risk reference should be made to Note 35.

At 31 December 2013, debt secured by assets of the Fiat Group excluding Chrysler amounts to €416 million (€363 million at 31 December 2012), of which €370 million (€276 million at 31 December 2012) due to creditors for assets acquired under finance leases. The total carrying amount of assets acting as security for loans amounts to €401 million at 31 December 2013 (€296 million at 31 December 2012).

At 31 December 2013, debt secured by assets of Chrysler amounts to €5,180 million (€5,530 million at 31 December 2012), and includes €4,448 million (€4,665 million at 31 December 2012) relating to the Secured Senior Notes and the Senior Secured Credit Facility (the “Tranche B Term Loan” and the “Revolving Credit Facility”, which at 31 December 2013 was undrawn), €165 million (€183 million at 31 December 2012) was due to creditors for assets acquired under finance leases and other debt and financial commitments for €567 million (€682 million at 31 December 2012).

In addition, at 31 December 2013 the Group’s assets include current receivables to settle Asset-backed financing of €596 million (€449 million at 31 December 2012), see Note 18.

Bonds

The bond issues outstanding at 31 December 2013 are as follows:

 CurrencyFace value of
outstanding bonds
(in million) 
CouponMaturityOutstanding
amount
(€ million)
GLOBAL MEDIUM TERM NOTES:          
Fiat Finance and Trade Ltd S.A. (1) EUR 900 6125% 8 July 2014 900
Fiat Finance and Trade Ltd S.A. (1) EUR 1,25 7625% 15 September 2014 1,25
Fiat Finance and Trade Ltd S.A. (1) EUR 1,5 6875% 13 February 2015 1,5
Fiat Finance and Trade Ltd S.A. (2) CHF 425 5000% 7 September 2015 346
Fiat Finance and Trade Ltd S.A. (1) EUR 1 6375% 01-apr-16 1
Fiat Finance and Trade Ltd S.A. (1) EUR 1 7750% 17 October 2016 1
Fiat Finance and Trade Ltd S.A. (2) CHF 400 5250% 23 November 2016 326
Fiat Finance and Trade Ltd S.A. (1) EUR 850 7000%  23 March 2017 850
Fiat Finance North America Inc. (1) EUR 1 5625% 12 June 2017 1
Fiat Finance and Trade Ltd S.A. (2) CHF 450 4000% 22 November 2017 367
Fiat Finance and Trade Ltd S.A. (1) EUR 1,25 6625% 15 March 2018 1,25
Fiat Finance and Trade Ltd S.A. (1) EUR 600 7375% 9 July 2018 600
Fiat Finance and Trade Ltd S.A. (1) EUR 1,25 6750% 14 October 2019 1,25
Other  EUR 7     7
TOTAL GLOBAL MEDIUM TERM NOTES         11,646
OTHER BONDS:          
Chrysler Group LLC (Secured Senior Notes) (3) USD 1,5 8000% 15 June 2019 1,088
Chrysler Group LLC (Secured Senior Notes) (3) USD 1,7 8250% 15 June 2021 1,232
TOTAL OTHER BONDS         2,32
HEDGING EFFECT AND AMORTISED COST VALUATION     500
TOTAL BONDS         14,466

(1) Bond for which a listing on the Irish Stock Exchange was obtained.

(2) Bond for which a listing on the SIX Swiss Exchange was obtained.

(3) The Secured Senior Notes were issued at par on 24 May 2011 and initially sold in a private placement to qualified institutional buyers and non-US persons as defined by US Securities Act. On 29 December 2011, in accordance with the indenture, Chrysler commenced an offer to exchange the Original Notes outstanding for notes having substantially identical terms as those originally issued and the same principal amount but do not contain restrictions on transfer. The offer to exchange the Original Notes expired on 1 February 2012. Substantially all of the Original Notes were tendered for Secured Senior Notes

Changes in bonds during 2013 are mainly due to:

  • the issue by Fiat Finance and Trade Ltd S.A. as part of the Global Medium Term Notes Programme of 6.625% notes at par having a principal of €1,250 million and due March 2018;
  • the repayment on maturity of a bond having a nominal value of €1 billion issued by Fiat Finance and Trade Ltd S.A. in 2006;
  • the issue by Fiat Finance and Trade Ltd S.A. as part of the Global Medium Term Notes Programme of 6.75% notes at par having a principal of €850 million and due October 2019;
  • the re-opening of the above €850 million 6.75% notes due October 2019, with the issue by Fiat Finance and Trade Ltd S.A. of a further €400 million of notes at 101.231% of par value and a yield to maturity of 6.50%, increasing the total principal amount of the bond to €1.25 billion;
  • the issue by Fiat Finance and Trade Ltd S.A. as part of the Global Medium Term Notes Programme of 4.00% notes at par having a principal of CHF 450 million and due November 2017.

The bonds issued by Fiat and Chrysler are subject to different terms and conditions, which vary by issuer and, in some cases, by individual issuance. The prospectuses and/or indentures relating to the principal bond issues are available on the Group’s website at www.fiatspa.com under “Investors - Debt and Credit Ratings - Bonds” and at www.chryslergroupllc.com under “Investor Relations - SEC filings”. These documents are unaudited.

Following the repayment on 15 February 2013 of the bond issued by Fiat Finance and Trade Ltd. S.A. having a nominal value of €1 billion, bearing fixed interest at 6.625%, all the bonds issued by the Fiat Group excluding Chrysler are currently governed by the terms and conditions of the Global Medium Term Note Programme. A maximum of €15 billion may be issued under this Program, of which notes of approximately €11.6 billion have been issued to 31 December 2013; the Program is guaranteed by Fiat S.p.A. The issuers taking part in the program include, amongst others, Fiat Finance and Trade Ltd. S.A. for an amount outstanding of €10.6 billion and Fiat Finance North America Inc. with a bond having a nominal value of €1 billion.

The companies in the Fiat Group may from time to time buy back bonds on the market that have been issued by the Group, also for purposes of their cancellation. Such buybacks, if made, depend upon market conditions, the financial situation of the Group and other factors which could affect such decisions.

Chrysler may redeem, at any time, all or any portion of the Secured Senior Notes on not less than 30 and not more than 60 days’ prior notice mailed to the holders of the Notes to be redeemed.

  • Prior to 15 June 2015, the 2019 Secured Senior Notes (“2019 Notes”) will be redeemable at a price equal to the principal amount of the 2019 Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make−whole” premium calculated under the indenture. At any time prior to 15 June 2014, Chrysler may also redeem up to 35% of the aggregate principal amount of the 2019 Notes, at a redemption price equal to 108% of the principal amount of the 2019 Notes being redeemed, plus accrued and unpaid interest to the date of redemption with the net cash proceeds from certain equity offerings. On and after 15 June 2015, the 2019 Notes are redeemable at redemption prices specified in the indenture, plus accrued and unpaid interest to the date of redemption. The redemption price is initially 104% of the principal amount of the 2019 Notes being redeemed for the twelve months beginning 15 June 2015, decreasing to 102% for the year beginning 15 June 2016 and to par on and after 15 June 2017.
  • Prior to 15 June 2016, the 2021 Secured Senior Notes (“2021 Notes”) will be redeemable at a price equal to the principal amount of the 2021 Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make−whole” premium calculated under the indenture. At any time prior to 15 June 2014, Chrysler may also redeem up to 35% of the aggregate principal amount of the 2021 Notes, at a redemption price equal to 108.25% of the principal amount of the 2021 Notes being redeemed, plus accrued and unpaid interest to the date of redemption with the net cash proceeds from certain equity offerings. On and after 15 June 2016, the 2021 Notes are redeemable at redemption prices specified in the indenture, plus accrued and unpaid interest to the date of redemption. The redemption price is initially 104.125% of the principal amount of the 2021 Notes being redeemed for the twelve months beginning 15 June 2016, decreasing to 102.75% for the year beginning 15 June 2017, to 101.375% for the year beginning 15 June 2018 and to par on and after 15 June 2019.

The bonds issued by Fiat Finance and Trade Ltd S.A. and by Fiat Finance North America Inc. impose covenants on the issuer and, in certain cases, on Fiat S.p.A. as guarantor, which is standard international practice for similar bonds issued by companies in the same industry sector as the Group. Such covenants include: (i) negative pledge clauses which require that, in case any security interest upon assets of the issuer and/or Fiat S.p.A. is granted in connection with other bonds or debt securities having the same ranking, such security should be equally and ratably extended to the outstanding bonds; (ii) pari passu clauses, under which the bonds rank and will rank pari passu with all other present and future unsubordinated and unsecured obligations of the issuer and/or Fiat S.p.A.; (iii) periodic disclosure obligations; (iv) cross-default clauses which require immediate repayment of the bonds under certain events of default on other financial instruments issued by the Group’s main entities; and, (v) other clauses that are generally applicable to securities of a similar type. A breach of these covenants can lead to the early repayment of the notes. In addition, the agreements for the bonds guaranteed by Fiat S.p.A. contain clauses which could lead to requirement to make early repayment if there is a change of the controlling shareholder of Fiat S.p.A. which leads to a resulting downgrading by the ratings agencies.

In addition, the indenture of the Secured Senior Notes issued by Chrysler Group LLC includes negative covenants which limited Chrysler’s ability and, in certain instances, the ability of certain of its subsidiaries to, (i) pay dividends or make distributions of Chrysler’s capital stock or repurchase Chrysler’s capital stock; (ii) make certain payments; (iii) create certain liens to secure indebtedness; (iv) enter into sale and leaseback transactions; (v) engage in transactions with affiliates; (vi) merge or consolidate with certain companies and (vii) transfer and sell assets. The indenture provides for customary events of default, including but not limited to, (i) non-payment; (ii) breach of covenants in the indenture; (iii) payment defaults or acceleration of other indebtedness; (iv) a failure to pay certain judgments and (v) certain events of bankruptcy, insolvency and reorganization. If certain events of default occur and are continuing, the trustee or the holders of at least 25% in principal amount of the notes outstanding under one of the series may declare all of the notes of that series to be due and payable immediately, together with accrued interest, if any.

Chrysler’s Secured Senior Notes are secured by liens junior to the Senior Secured Credit Facilities on substantially all of Chrysler Group LLC’s assets and the assets of its U.S. subsidiary guarantors, including 100% of the equity interests in Chrysler’s U.S. subsidiaries and 65% of the equity interests in its non U.S. subsidiaries held directly by Chrysler Group LLC and its U.S. subsidiary guarantors.

Borrowing from banks

At 31 December 2013, the item includes €2,119 million (€2,265 million at 31 December 2012) outstanding on the $3.0 billion Tranche B Term Loan of Chrysler, payable in equal quarterly installments of $7.5 million, with the remaining balance due at maturity in May 2017. Taking advantage of market conditions and its improved credit profile, in June 2013, Chrysler had reduced the interest rate for its $3.0 billion Tranche B Term Loan and its undrawn $1.3 billion Revolving Credit Facility, maturing in May 2016. Certain loan covenants were also amended to be consistent with those in the Chrysler’s bond agreement. Subsequently, in December 2013, Chrysler further reduced the interest rate on the Tranche B Term Loan.

Medium/long term committed credit lines (expiring after twelve months) currently available to the treasury companies of Fiat Group excluding Chrysler amount to approximately €3.2 billion at 31 December 2013, of which €2.1 billion related to the 3-year syndicated revolving credit line due in July 2016 that was undrawn at 31 December 2013. In June 2013, Fiat S.p.A. signed a new €2 billion 3-year revolving credit line, which replaced the existing of €1.95 billion signed in July 2011. The syndication of the new line was successfully completed on 18 July 2013 with a group of 19 banks and, as a result of the positive response, the facility was increased to €2.1 billion.

Additionally, the operating entities of Fiat Group excluding Chrysler have committed credit lines available, with residual maturity after twelve months, to fund scheduled investments, of which approximately €1.8 billion was still undrawn at 31 December 2013.

The €2.1 billion syndicated credit facility of Fiat contains typical covenants for contracts of this type and size, such as financial covenants (Net Debt/EBITDA and EBITDA/Net Interest ratios related to industrial activities) and negative pledge, pari passu, cross default and change of control clauses. The failure to comply with these covenants, in certain cases if not suitably remedied, can lead to the requirement to make early repayment of the outstanding loans. Similar covenants are contemplated for loans granted by the European Investment Bank for a total of €1.1  billion, in order to fund the Group’s investments and research and development costs. In addition, the above syndicated credit facility, currently contemplates limits to the capability to extend guarantees or loans to Chrysler.

At 31 December 2013, Chrysler has secured revolving credit facility (“Revolving Credit Facility”) amounting to approximately €0.9 billion ($1.3 billion), fully undrawn at that date and maturing in May 2016.

Chrysler’s senior credit facilities, which include the above mentioned Tranche B Term Facility and the Revolving Credit Facility, are secured by a senior priority security interest in substantially all of Chrysler Group LLC’s assets and the assets of its U.S. subsidiary guarantors, subject to certain exceptions. The collateral includes 100% of the equity interests in Chrysler’s U.S. subsidiaries and 65% of the equity interests in its non U.S. subsidiaries held directly by Chrysler Group LLC and its U.S. subsidiary guarantors.

The Senior Secured Credit Agreement includes negative covenants, including but not limited to: (i) limitations on incurrence, repayment and prepayment of indebtedness; (ii) limitations on incurrence of liens; (iii) limitations on making certain payments; (iv) limitations on transactions with affiliates, swap agreements and sale and leaseback transactions; (v) limitations on fundamental changes, including certain asset sales and (vi) restrictions on certain subsidiary distributions. In addition, the Senior Secured Credit Agreement requires Chrysler to maintain a minimum ratio of “borrowing base” to “covered debt” (as defined in the Facility), as well as a minimum liquidity of $3.0 billion, which includes any undrawn amounts on the Revolving Credit Facility.

The Senior Secured Credit Agreement contains a number of events of default related to: (i) failure to make payments when due; (ii) failure to comply with covenants; (iii) breaches of representations and warranties; (iv) certain changes of control; (v) cross−default with certain other debt and hedging agreements and (vi) the failure to pay certain material judgments.

Payables represented by securities

At 31 December 2013, the item Payables represented by securities includes the VEBA Trust Note of €3,575 million (€3,863 million at 31 December 2012), which represents Chrysler's financial liability to the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (“UAW”) Retiree Medical Benefits Trust (“VEBA Trust”) having a carrying value of $4,715 million (€3,419 million). This financial liability was recognized by Chrysler in connection with the settlement of obligations related to postretirement healthcare benefits for certain UAW retirees. The VEBA Trust Note has an implied interest rate of 9.0% and requires annual payments of principal and interest through 15 July 2023. On 7 February 2014, Chrysler repaid the VEBA Trust Note through the issuance of secured senior notes for $3 billion and senior secured credit facilities for $2 billion (as described in Note 39 – Subsequent events) .

At 31 December 2013, Chrysler’s Payables represented by securities also includes the Canadian Health Care Trust Notes totaling €703 million (€864 million at 31 December 2012), which represents Chrysler’s financial liability to the Canadian Health Care Trust arising from the settlement of postretirement health care benefits for represented employees, retirees and dependants of Chrysler Canada Inc.’s National Automobile, Aerospace, Transportation and General Workers Union of Canada (“CAW”). These notes were issued in four tranches maturing up to 2024.

Other

At 31 December 2013, payables for finance leases amount to €535 million and may be analyzed as follows:

 At 31 December 2013At 31 December 2012
(€ million)due within
one year
due
between
one and
five years
due
beyond
five years
Totaldue within
one year 
due
between
one and
five years
due beyond
five years
Total 
Minimum future lease payments  80 279 261 620 90 246 215 551
Interest expense (20) (52) (13) (85) (20) (57) (15) (92)
Present value of minimum lease payments 60 227 248 535 70 189 200 459

At 31 December 2013, the Fiat Group excluding Chrysler had outstanding financial lease agreements for certain Property, plant and equipment whose overall net carrying amount totals €377 million (€268 million at 31 December 2012) (Note 15). As discussed in Note 15, finance lease payables also relate to suppliers’ assets recognized in the Consolidated financial statements in accordance with IFRIC 4.

Net financial position

In compliance with the Consob Regulation issued on 28 July 2006 and in conformity with the ESMA update of the CESR’s “Recommendations for the consistent implementation of the European Commission’s Regulation on Prospectuses”, the Net financial position of the Group at 31 December 2013 is as follows

At 31 December 2013At 31 Dember 2012
(€ million)Totalof which
Related parties
(Note 31) 
Totalof which
Related parties
(Note 31)
A. Cash and cash equivalents 19,439 - 17,657 -
B. Current securities  247 - 256 -
C. Liquidity (C) = (A+B) 19,686 - 17,913 -
         
D. Receivables from financing activities (Current financial receivables) 3,671 163 3,727 201
         
E. Other financial assets 533 - 519 -
         
F. Debt 29,902 448 27,889 272
         
G. Other financial liabilities 137 - 201 -
         
H. Net financial position
(H) = (C+D+E-F-G)
(6,149) (285) (5,931) (71)

The item Receivables from financing activities includes the entire portfolio of the Consolidated financial services entities, classified as current assets as they will be realized during the normal operating cycle of these companies.

The following is reconciliation between the Net financial position as presented in the above table and Net debt as presented in the Report on Operations:

At 31 December 2013At 31 December 2012
(€ million)Total Fiat GroupTotal Fiat Group
Consolidated net debt as presented in the Report on Operations (9,793) (9,6)
Less: Current financial receivables, excluding those due from jointly controlled financial services companies, amounting to €27 million at 31 December 2013 (€58 million at 31 December 2012), and financial receivables for leased assets under IFRIC 4 3,644 3,669
Net financial position (6,149) (5,931)

Reference should be made to Notes 18, 19, 20 and 21 and the information provided in this Note for a further analysis of the items in the table.

(1)  These amounts exclude the proceeds and repayments of €595 million arising from the amendments to the Tranche B Term Loan made in June 2013 by Chrysler.