By Deepa Seetharaman
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Fiat can buy the Treasury's stake within 12 months of repaying loans it owes the U.S. government that stem from its 2009 bailout, Chrysler said on Monday in a filing with the U.S. Securities and Exchange Commission.
Chrysler owes about $7.5 billion in loans to the United States and Canada and the U.S. automaker intends to repay the loans by the end of June, the company said last month.
As part of Chrysler's 2009 bailout deal, the U.S. Treasury gave Fiat management control and a 20-percent stake in Chrysler. Treasury officials laid out a series of tests and options that allowed Fiat to increase its stake to 51 percent.
Fiat now has a 30 percent stake in Chrysler after meeting two tests earlier this year. After the refinancing deal, Fiat's stake will jump to 46 percent.
The 2009 agreement left open the possibility for Fiat to increase its stake in Chrysler beyond 51 percent. Monday's filing gave finer details on how Fiat could do that.
Fiat also has the option to buy up to 40 percent of the interest held by the healthcare trust affiliated with the United Auto Workers, known as the Veba, Chrysler said in the filing.
Fiat can exercise an option to buy a portion of the stake held by the Veba starting in July 2012 and through the end of 2016. The company can acquire up to 8 percent of the Veba stake once every six months, according to the filing.
The U.S. Treasury currently has 8.6 percent of Chrysler, while the healthcare trust affiliated with the United Auto Workers union has a 59.2 percent stake.
The government and union interests are set to fall further once Chrysler repays its government loans.
Analysts and bankers have said the strengthening ties between Fiat and Chrysler would make the U.S. automaker more attractive to potential stock investors.
Once Fiat gets majority ownership, it can appoint the majority of Chrysler's board of directors and can direct the timing of events, including a possible initial public offering, Chrysler said in the filing.
(Reporting by Deepa Seetharaman; editing by Andre Grenon)