Fiat-Chrysler gets credit upgrade from S&P ahead of merger

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The near-term outlook for Italian-American carmaker Fiat-Chrysler is improving as it moves toward its merger with French rival Peugeot, with an improved credit rating and positive sales news from the company's biggest foreign markets.

The developments come amid calls for the Italian government to take a stake in Stellantis, the company that will be formed by the merger between Fiat-Chrysler and Peugeot.

The 38-billion-U.S.-dollar merger is on pace to be completed during the first three months of this year.

Rating firm Standard & Poor's on Monday announced that it improved its long-term credit rating for Fiat-Chrysler to BBB-, up from BB+, a high investment grade. The firm said increased stability from the soon-to-be-completed merger was the main factor behind the upgrades.

For short-term debt, the company's rating was raised to A-3 from B. An A-3 rating is the third level of the highest investment tier for Standard & Poor's.

Meanwhile, Milano Finanza, a major Italian publication focusing on economic news, reported that Fiat-Chrysler sales in Brazil -- the car maker's third-most-important market after the United States and Italy, according to data firm Statista -- were stronger than expected in December.

Milan-based Banca Akros estimated that Fiat-Chrysler's earnings in Brazil will total around 100 million euros (122 million U.S. dollars) before taxes in December on sales of 195,000 cars for the month. That is 9.5-percent lower than for the same month in 2019, but more than double the 43-million-euros Banca Akros said investors expected for the month.

Also on Monday, former Italian Prime Minister and European Commission President Romano Prodi added his voice to the high-profile figures in Italy calling for the Italian government to acquire a financial stake in Fiat-Chrysler, which would become a stake in Stellantis once the merger is complete.

Prodi said such a stake would give the government a say in Stellantis' operations, including decisions that could have an impact on the national security or the Italian economy, such as possible plant closures.

Along with the founding Peugeot family and China's Dongfeng Motor Group, the French government is a major shareholder in Peugeot, which means it will also be a significant shareholder in Stellantis.

When Italy's Fiat merged with United States-based Chrysler in 2011, it bought out stakes in Chrysler held by the United States Treasury and the Canadian government.

Last week, Italy's Deputy Finance Minister Antonio Misiani said the government was studying the possibility of acquiring a stake in Fiat-Chrysler that would result in a share in Stellantis equivalent to the 6.2-percent stake that will be held by the French government. But Misiani said such a move would be subject to conditions that "do not exist at the moment."

Shareholders from both Fiat-Chrysler and Peugeot voted overwhelmingly to approve the merger on Jan. 4, the final hurdle before the deal could close. The unification of the companies will be completely effective on Jan. 16, with shares in Stellantis trading on the stock exchanges in Milan and Paris in lieu of Fiat-Chrysler and Peugeot shares starting on Jan. 18, and in New York the following day. (1 euro = 1.22 U.S. dollars) 

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