AFSCME 3357-HOF'S BLOG

Chrysler Debt sold at $.61 on the dollar

According to Autonews.com (free registration required), the financial syndicate that loaned $7 billion to Cerberus to buy Chrysler, is selling some of the Chrysler LLC commercial paper at 61 cents on the dollar. Combined with a facial or "coupon" rate of 6.71%, the the implied interest demanded by the investors is about 20%. This shows that financial markets do not have a lot of confidence in the future of Chrysler. It also shows that Chrysler's cost of capital is very high. Also noted by Autonews is the change in the market for Chrysler's debt in recent months. In November 2007, Chrysler tried to unload the debt at 97% on the dollar, and in March, the target price was 74-76% of face value. That's a trend line that you don't want to extrapolate. (I just wanted to use the word extrapolate in a sentence.)