wikedgolf
02-21-2008, 03:51 PM
FRANKFURT (Reuters) -- Germany's Porsche Automobil Holding called in a 10-billion-euro ($14.72 billion) credit line, but said today that the money would not be used to raise its stake in Volkswagen.
"The amount borrowed will be invested free of risk at favorable interest rates and will bring in additional profit for Porsche," the company said. It referred to the measure as a "technical one" to secure favorable loan conditions in a credit market that has largely frozen up following the U.S. subprime mortgage crisis.
Porsche Automobil Holding fully owns sports car maker Porsche and has a 31 percent voting stake in Volkswagen, in which it is the largest stockholder and is widely expected to eventually take majority control.
A Porsche spokesman declined to comment either on exactly how the money would be invested, or the specific nature of the loan conditions. He said it would not be used to increase the company's holding in Volkswagen since Porsche's supervisory board had not authorized such a move.
"We can invest the money at a better yield than we would have to pay," the spokesman said.
"They'll likely invest it in the money market or short-term government bonds that mature within the period of the credit line. Everything else would come with a certain amount of risk," said Marc-Rene Tonn, analyst at M.M. Warburg.
Shares in Volkswagen reversed moderate losses on the news, but swiftly sank back into the red as soon as it became clear that Porsche did intend to raise its stake, while Porsche shares fell further.
Bid designed to fail
The syndicated loan originally amounted to 35 billion euros and was arranged last March to cover the sum Porsche would have had to spend to fully acquire the remaining Volkswagen stock as part of a mandatory takeover bid Porsche launched after crossing the 30 percent voting threshold.
At the time, the loan was among the largest in the EMEA loan market, with the record then held by German utility E.ON's 37.1-billion-euro facility to back its bid for Spanish rival Endesa that ultimately failed.
It was later reduced to 10 billion after just 0.06 percent of the remaining VW stock was tendered to Porsche following a lowball bid designed to fail.
The Stuttgart-based holding company had appointed ABN Amro, Barclays Capital, Merrill Lynch, Commerzbank and UBS as lead arrangers of the credit facility.
Shares in Porsche traded down 3.8 percent near its intraday low by 1211 GMT, while Volkswagen was down 0.9 percent amid a 2 percent drop in the DJ Stoxx European autos index.
Source: AutoNews (http://www.autonews.com/apps/pbcs.dll/article?AID=/20080220/ANE02/675737484/1142/OEM)
"The amount borrowed will be invested free of risk at favorable interest rates and will bring in additional profit for Porsche," the company said. It referred to the measure as a "technical one" to secure favorable loan conditions in a credit market that has largely frozen up following the U.S. subprime mortgage crisis.
Porsche Automobil Holding fully owns sports car maker Porsche and has a 31 percent voting stake in Volkswagen, in which it is the largest stockholder and is widely expected to eventually take majority control.
A Porsche spokesman declined to comment either on exactly how the money would be invested, or the specific nature of the loan conditions. He said it would not be used to increase the company's holding in Volkswagen since Porsche's supervisory board had not authorized such a move.
"We can invest the money at a better yield than we would have to pay," the spokesman said.
"They'll likely invest it in the money market or short-term government bonds that mature within the period of the credit line. Everything else would come with a certain amount of risk," said Marc-Rene Tonn, analyst at M.M. Warburg.
Shares in Volkswagen reversed moderate losses on the news, but swiftly sank back into the red as soon as it became clear that Porsche did intend to raise its stake, while Porsche shares fell further.
Bid designed to fail
The syndicated loan originally amounted to 35 billion euros and was arranged last March to cover the sum Porsche would have had to spend to fully acquire the remaining Volkswagen stock as part of a mandatory takeover bid Porsche launched after crossing the 30 percent voting threshold.
At the time, the loan was among the largest in the EMEA loan market, with the record then held by German utility E.ON's 37.1-billion-euro facility to back its bid for Spanish rival Endesa that ultimately failed.
It was later reduced to 10 billion after just 0.06 percent of the remaining VW stock was tendered to Porsche following a lowball bid designed to fail.
The Stuttgart-based holding company had appointed ABN Amro, Barclays Capital, Merrill Lynch, Commerzbank and UBS as lead arrangers of the credit facility.
Shares in Porsche traded down 3.8 percent near its intraday low by 1211 GMT, while Volkswagen was down 0.9 percent amid a 2 percent drop in the DJ Stoxx European autos index.
Source: AutoNews (http://www.autonews.com/apps/pbcs.dll/article?AID=/20080220/ANE02/675737484/1142/OEM)