As reported in the August 15 issue of Ag Equipment Intelligence, CNH Global has tapped the bond market for $1 billion to begin repaying its parent company Fiat a loan it took last year. Fiat needs the money to offset the costs for its takeover of carmaker Chrysler Group LLC.

Ann Duignan, machinery analyst for JP Morgan reports that yesterday, CNH completed the private offering of $1 billion in 7.75% senior notes due 2013. The company said that it plans to use the net proceeds of $955 million for repayment of debt owed to Fiat and general corporate purposes.

"Based on our conversations with the management, we believe the company is likely to use the proceeds to replenish the liquidity gap which has arisen from the $0.5 billion debt maturity the company met on June 1, and repay short-term Fiat debt and the $170 million note with Fiat affiliates due in Q2'10. In our view, CNH is reducing its dependence on Fiat for capital and liquidity," Duignan says.

"We believe CNH's decision to tap the capital markets for liquidity, and reduce dependence on Fiat, may be a step toward an eventual spin off of the business by Fiat. Of note, the company chose to use a slightly more expensive, but longer-dated and stable source of capital," the analyst says in a note to investors this morning.