In Need For Cash: VW Sells 2.5 Billion Euros In Bonds After Buying Porsche And Ducati
|   Friday, November 09, 2012
The German Volkswagen Group recently increased its already impressive domain by adding 2 more prestigious brands: Porsche and Ducati. To increase their liquidity after the acquisitions, Volkswagen has sold 2.5 billion euro (3.2 billion dollars) in convertible bonds.

Buying the remaining 50.1 percent of Porsche back in August cost some 7 billion euro in equity and debt, while the shares of Ducati needed nearly 750 million back in July.

Experts also note that the cash gained from the bonds can be used to completely take over another German producer, this time it would be truck maker Man SE.
"The bond sale was a bit of a surprise as VW's net liquidity was quite good at the end of the third quarter," said Michael Punzet, analyst at DZ Bank in Frankfurt for Autonews. "It seems that VW wants to proceed with the takeover of MAN SE. The acquisition of the shares of the truck maker VW does not already own will cost about 3.3 billion euro."

The Bernstein Research analyst Max Warburton said that along with MAN, Volkswagen might as well use the money to purchase the shares in Scania AB that are not already owned or to take a stake in Navistar International in the United States. Buying Ferrari or Alfa Romeo from the Fiat group might also be viable alternatives.

"VW raised money in a similar fashion in 2010 and used this money to pay for the installment of Porsche," said Warburton. He continues "Does VW really need this cash? We can't see it to be honest." "For a company generating over 2 billion euro in free cash flow a quarter, VW's problem is arguably what to do with its current liquidity, rather than having any need for capital."

According to the offer document, the bonds will automatically convert if the company's ratings fall below Baa3 and BBB into junk. S&P rated the bonds at BBB, based on the deal's "high" equity content. Bank of America, Credit Suisse Group AG and Deutsche Bank AG managed the sale.
Volkswagen's present voting rights are 75.03 percent in MAN and 70.94 in Sweden based Scania. The company said it may pursue a domination agreement for MAN in order to gain greater control while VW seeks closer ties with Scania.

The Germans from Volkswagen were not that affected by the European crisis. The group was supported by growth in the United States and China as well as the expansion of the Audi luxury brand.

Volkswagen has also restated, 2 weeks ago, the target to "match" 2011's operating income of 11.3 billion euro by the end of this year, in spite of a profit slip of 1.6 percent in the first 9 months of 2012.

"With a view to our future global growth and the systematic implementation of our Strategy 2018, we want to make our position even more robust and flexible, and the planned convertible notes will further strengthen our liquidity and capital base," VW finance chief Hans Dieter Poetsch declared for Autonews.
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