Chrysler's Initial Credit Ratings Assigned Below Ford, GM

DETROIT - Chrysler Group LLC today was assigned credit ratings below investment grade, and below its Detroit competitors Ford Motor Co. and General Motors Co.

Standard & Poor’s Ratings Services issued a B+ credit rating a day after the automaker reported its first quarterly profit since emerging from bankruptcy in June 2009, Automotive News reported.

Moody's Investors Service Inc. assigned a B2 rating, adding that the outlook for the suburban Detroit automaker is positive.

Ford and GM have BB- ratings from S&P.

"The preliminary corporate credit rating reflects our assessment of Chrysler's business risk profile as weak and its financial risk profile as aggressive," said S&P credit analyst Robert Schulz in a statement.

Schulz wrote that he believes Chrysler’s automotive operations will remain profitable if industry light-vehicle sales stay above 12 million units.

Chrysler is taking steps to repay $7.6 billion in bailout loans from the U.S. government and the federal and provincial governments of Canada. On Monday, the automaker said it would borrow $3.5 billion in a senior secured six-year term loan and $2.5 billion in secured bonds that will have eight- and 10-year maturities.

Today, Moody’s assigned Chrysler’s credit facilities a Ba2 rating, citing expectations that Chrysler’s continued alliance with Fiat will boost its operating performance, vehicle portfolio and financial results.

"Ongoing cooperation between Chrysler and Fiat in the areas of purchasing, product development, platform sharing and international distribution could support further improvement in Chrysler's operating and financial position beyond 2011," Moody's said in a statement today.

Fiat has a Ba1 rating from the investor services firm.

Chrysler plans to use the term loan, bonds and $1.27 billion in cash from Fiat to refinance its government loans during the second quarter. The contribution from Fiat will allow the Italian automaker to raise its stake in Chrysler to 46 percent.

A refinancing deal would bolster Chrysler's balance sheet, making it more attractive for an initial public stock offering. The deal also paves the way for Fiat to take majority control (51 percent) of the U.S. automaker, which analysts say could come later this year.

In February, S&P lowered its corporate credit rating on Fiat to BB from BB+ and warned it could further drop the investment grade if Fiat acquires a majority stake in Chrysler this year.