Fiat’s access to Chrysler funds curbed by dividend cap, debt covenants

MILAN, Feb 17 (Reuters) :  Indebted Italian carmaker Fiat  said on Monday that its access to the cash of US subsidiary Chrysler, which it took full control of last month, was limited by a cap on dividends from the unit and its debt covenants.

Part of the motivation for the auto group's $4.35 billion deal to take full ownership of the No. 3 US carmaker was to give Fiat access to Chrysler's finances so it could invest in new models to revamp its loss-making operations in Europe.

Analysts have raised concerns about Fiat's growing debt pile and its ability to fund a strategy that will shift the automaker's focus to its upscale Maserati and Alfa Romeo brands from an over-reliance on low-margin mass-market models.

Responding to a request for clarification from market regulator Consob, Fiat said that beyond the cap, dividend payments were also subject to the condition that Chrysler's liquidity exceeds a threshold of $3 billion. It said Chrysler's liquidity totaled $14.7 billion at the end of 2013.

Fiat also said intercompany financing was limited by covenants that require deals to be approved by a majority of "disinterested" members of the Chrysler board of directors.

Fiat said it had enough resources to fund its activities, however.

"On the basis of the group's available liquidity, credit lines in place and available for investment in industrial activities, in addition to the ability to access capital markets ... the group believes its capital resources are more than adequate to meet the projected funding requirements," it said in a statement.