DaimlerChrysler Corp. said Tuesday that it would combine its existing credit lines into a $17 billion facility to be syndicated by Chase Manhattan Corp. and Deutsche Bank. The debt consolidation follows the merger last November of Germany's Daimler-Benz AG with Chrysler Corp. of the U.S., which created DaimlerChrysler.
The restructuring, which is not believed to include any new financing, is part of the merged company's drive to use its newly-strengthened credit rating to reduce debt costs.
The syndication will include a multi-currency European facility with a $5 billion revolving credit for DaimlerChrysler and its subsidiaries, and a $12 billion revolving credit for DaimlerChrysler North America Holding Corp.
Syndication is expected to begin by June 30, the company said. Terms of the deal were not disclosed, though previous loans to Chrysler Corp. and Daimler-Benz AG have been investment-grade.
Deutsche Bank and Chase had long-standing relationships with Daimler- Benz AG and Chrysler Corp., and other banks with long-term relationships with the car makers are expected to participate in the loans, including Commerzbank AG, Bank of America Corp., Credit Suisse First Boston, and Bank One Corp.
Among the credit lines the new financing will replace are $8.55 billion in credit lines to Chrysler that were syndicated in April 1997 by Chase, Royal Bank of Canada, and Toronto-Dominion. Those lines would have matured in 2002.
The new deal will also refinance a $4 billion credit line to Daimler- Benz North America that was syndicated in June 1998. That credit, syndicated by J.P. Morgan & Co., matured last Friday.
Analysts said the decision to consolidate credit lines was anticipated as the company looks to pare down the cost of debt-a savings expected to be relatively minor when compared to cost-cutting gains expected from the combination of industrial operations.
In that regard, "it's still to be seen whether they can realize the synergies promised at the time of transaction," said Scott Sprinzen, an analyst at Standard & Poor's Ratings Services. "But apart from that, the company is doing very well in its key businesses."