Cleary Gottlieb Steen & Hamilton has tied down a controversial lifeline designed to keep Fiat afloat as the troubled industrial group attempts to stave off the wrath of the Italian government. The e1.1bn (£690.3m) financing, which was announced in June but put in place only last week, was provided by a syndicate of banks led by Citibank, which Fiat hopes will give the company room to cut its debt burden. It is understood that the three-year loan has firstly been secured against Fiat's 24.6 per cent stake in Italenergia, which controls Italy's second-largest electricity company Edison. Second, as an added security, the banks will receive proceeds of at least e1.5bn (£941.3m) from a put option, which would allow Fiat to force Electricite de France (EdF), which has an 18 per cent stake in Italenergia, to acquire its entire 24.6 per cent stake in the energy group. While Fiat also has the option of buying back the shares in 2005, it has already sold off a 14 per cent stake in Italenergia, much to the chagrin of the Italian government, which is concerned that much of the troubled group will fall into foreign hands. As part of a deal with General Motors, which two years ago acquired a 20 per cent stake in Fiat's auto unit, the Italian company could sell its remaining 80 per cent share to the US car manufacturer in 2004. Allen & Overy, led by George Link, acted for Citibank on the complex finance deal. "The transaction was interesting not just because of negotiations having to take place between two counterparties, but also because its success was dependent upon a number of other transactions occurring," commented Link. "These included the restructuring of the company over whose shares the banks were taking security." Cleary has acted for Fiat for a number of years, both on antitrust and corporate matters. Earlier this year, the firm advised Fiat on the aborted float of Ferrari. However, Fiat subsequently sold off a 34 per cent stake in the sports car manufacturer to Italy's Mediobanca. On the financing side, Michael Volkovitsch, who is based at Cleary's Frankfurt office, acted for the company, with support from the firm's Italian office. EdF was represented by Willkie Farr & Gallagher, with English law advice provided by Macfarlanes.