DTAG Releases Update on Chrysler Exposure
Chrysler Group LLC (the "New Chrysler") has agreed to assume the residual value guarantees and rebate bonuses offered to fleet customers under the old company's (Chrysler LLC) guaranteed depreciation programs.
On June 10, Dollar Thrifty Automotive Group Inc. (DTAG) provided an update on its credit exposure to Chrysler LLC, which has declined significantly due to payments received since the commencement of the Chrysler’s bankruptcy proceeding and its successful asset sale. As previously announced, the company’s primary credit exposure to Chrysler relates to residual value guarantees on program vehicles in the company’s rental fleet, as well as on program vehicles that had previously been returned to auction.
In connection with the completion of the sale of substantially all of the assets of Chrysler LLC to Chrysler Group LLC (Chrysler Group), Chrysler Group has agreed, as stated in the bankruptcy court order approving the sale, to assume certain liabilities of Chrysler LLC, including liabilities under residual value guarantees and rebate bonuses offered to fleet customers prior to the closing of the sale with respect to vehicles subject to guaranteed depreciation programs. Based on the assumption of this liability by Chrysler Group, the company believes that its primary exposure will be fully honored and settled in the ordinary course of business.
As of June 10, 2009, the company’s exposures were as follows:
Approximately $6.4 million in trade receivables under incentive and vehicle repurchase programs.
Approximately $250,000 in estimated exposure for residual value guarantees on approximately 40 program vehicles that have been returned to auction but not yet sold.
Approximately $23 million in estimated exposure for residual value guarantees on approximately 3,600 program vehicles currently in the company’s rental fleet. These vehicles are subject to return to auction in the third and fourth quarters of 2009.
“We are very pleased that Chrysler completed its asset sale in a way that will allow Chrysler Group and Dollar Thrifty to continue to benefit from our long-term association. The removal of this uncertainty is of significant benefit to Dollar Thrifty and all of our stakeholders,” said Scott L. Thompson, president and chief executive officer. “We are particularly pleased that the sale process was handled in such a timely way that we have not experienced a negative impact on the residual values of Chrysler products. We look forward to continuing our relationship and expect to be working closely with Chrysler Group in the near future.”
Dollar Thrifty separately confirmed that it does not have any material exposure to General Motors.
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