Netherlands-domiciled Fiat Chrysler Automobiles N.V. (NYSE: FCAU) is reportedly nearing closure on loan guarantees of up to €6.3 billion ($7.1 billion) from the Italian government. The company’s financial headquarters are based in London and its automobile manufacturing plants are located in the Americas, Europe, India and China.

Italy was the first European country to feel the brunt of the COVID-19 pandemic, and the country’s economy was locked down for months and is only beginning to reopen. The Italian government’s guarantee (if it comes) will be used exclusively in Italy to help pay workers’ wages, suppliers and investments in Italian facilities.

There was some hope that the loan guarantees would be approved last week, but another train apparently has jumped the track.

The proposed loan would reportedly freeze dividends at least through the end of this year or longer if FCA fails to make investments as promised. Then there’s the $50 billion planned merger announced last December. FCA reached a binding agreement to merge with Peugeot maker Groupe PSA in a deal to create the world’s fourth-largest automaker. The merger of FCA and PSA would bring Jeep, Ram, Chrysler, Dodge, Fiat, Alfa Romeo and Maserati together with Peugeot, Citroen, Opel and Vauxhall into the same tent.

Now, European Commission (EC) regulators, who were expected to approve the deal last week, have said that they want to take a closer look. EC executive vice president (and bane of a number of U.S. high tech firms), Margrethe Vestager, said in a press release, “We will carefully assess whether the proposed transaction would negatively affect competition in these markets and ensure that a healthy competitive landscape remains for all the individuals and businesses relying on commercial vans for their activities.”

The EC is particularly concerned about the potential lack of competition in the commercial van segment in European Union member states Belgium, Croatia, Czechia, France, Greece, Hungary, Italy, Lithuania, Luxembourg, Poland, Portugal, Slovakia, Slovenia, Spain and the United Kingdom.

A condition of the stalled merger is a special dividend of €5.5 billion to FCA shareholders once the merger is completed. Can/will FCA use the loan guarantees to back that dividend payment? FCA’s majority owner is a Netherlands-based investment fund named Exor, which owns a stake of nearly 29% in the automaker.

Needless to say, there are some questions about the propriety of the Italian government backing a dividend payment. For example, exactly how does draining $6.2 billion away in a special dividend advance the purpose of the guarantees to pay wages and invest in new capacity?

But government-backed loans are a big hit with investors, and FCA shares traded up about 4.2% in New York Monday at $9.66, in a 52-week range of $6.00 to $16.25. The consensus 12-month price target on the stock is $13.42.

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