Daimler cutting borrowing costs with a 7 billion-euro refinancing

Article by Christian Andrei, on September 26, 2010

Sources reveal that Daimler AG is reducing borrowing costs with a 7 billion-euro ($9.4 billion) credit line to refinance debt. Daimler, which owns the Mercedes-Benz and Maybach nameplates, is in a better position to negotiate for better terms due to the increasing sales in the US and China. In July, the carmaker raised its 2010 operating profit forecast to 6 billion euros from 4 billion euros.

The sources added that lenders are being offered an initial interest margin at 60 basis points more than benchmark lending rates for the five- year revolving credit.

Bloomberg data show that last year, there had been a margin of 160 basis points for a credit line it agreed last year. The sources said that lenders were offered a 15 basis-point fee if it uses more than one-third of the credit line, and 30 basis points if it uses more than two-thirds.

They said that the facility also pays a commitment fee equivalent to 35% of the interest margin, which will change depending on Daimler's credit rating.

A basis point is 0.01 percentage point. Daimler has yet to comment on this report though. Bloomberg data also indicate that Deutsche Bank AG, Societe Generale SA and UniCredit SpA are coordinators of the refinancing.

Standard & Poor's and Fitch Ratings rank Daimler's debt BBB+, the third-lowest investment grade. However, Moody's Investors Service rates it a level higher at A3. [via Bloomberg]

Topics: daimler

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