MILAN (Reuters) – Italy’s biggest retail bank Intesa Sanpaolo <ISP.MI> approved on Tuesday a 6.3 billion euro ($6.9 billion) loan for Fiat Chrysler <FCHA.MI> subject to the car maker securing a guarantee from the state, a source close to the matter said.
The source said Intesa’s board had approved the loan in consideration of the crucial role of the financing for the entire Italian automotive industry.
The state guarantee which Fiat Chrysler (FCA) is requesting will cover 80% of the amount borrowed, the source added.
FCA earlier this month said its Italian unit was working with Rome and Intesa Sanpaolo to obtain a state-backed 6.3 billion euro, three-year facility designed to help the group’s operations in the country and the whole industry to weather the crisis triggered by the coronavirus.
The automotive industry employs more than 400,000 people in Italy and accounts for around 6% of the country’s gross domestic product.
The loan’s approval will be effective once FCA completes the request process with Italy’s export credit agency SACE, through which the state provides its guarantee, and obtains a final authorisation and conditions for the loan from the Treasury, the source said.
FCA declined to comment.
A second source familiar to the matter said one option being considered was for Intesa to syndicate the loan at a later stage with a group of lenders.
The loan would be part of more than 400 billion euros in bank credit that Italy is making available to businesses under an emergency liquidity scheme to support the economy in the face of the coronavirus emergency. To qualify, companies must agree not to pay dividends this year.
FCA has cancelled its 1.1 billion euro planned dividend on 2019 earnings.
(Reporting by Valentina Za and Gianluca Semeraro, Additional reporting and writing by Giulio Piovaccari; Editing by Chizu Nomiyama)