Volkswagen AG sells 2.5 billion euros in convertible bonds in order to boost liquidity

Article by Christian Andrei, on November 7, 2012

After having purchased Porsche and Ducati, Volkswagen AG had to increase its liquidity and so it sold 2.5 billion euros ($3.2 billion) in bonds that will instantly convert to shares at maturity. Volkswagen released a statement, saying that the three-year notes will pay an annual coupon of 5.5%. VW said that the minimum conversion price has been set at 154.50 euros while the maximum is at 185.40 euros.

VW said that it required money to boost funding. This year, it paid 4.49 billion euros for the remaining 50.1% of sports-car maker Porsche that it didn’t own yet. VW had also spent 860 million euros to purchase Ducati motorbikes. At the end of September, its net liquidity dropped by 57% to 9.22 billion euros.

According to analysts, the money can be spent on completing the takeover of German truckmaker MAN SE, which is already controlled by VW. Michael Punzet, an analyst at DZ Bank in Frankfurt, said that the bond sale came as a surprise since VW’s net liquidity was fine when the third quarter ended. He added that it appears that VW seeks to move forward with taking over MAN SE.

He estimates that acquiring the shares that it doesn’t yet own would total to around 3.3 billion euros. VW experienced a drop of up to 7.05 euros, or 4.3%, the largest decline since Aug. 30, to 155.35 euros. Its trading had fallen by 4% as of 11:52 a.m. in Frankfurt. Meanwhile, MAN advanced by up to 3.80 euros, or 4.8%, to 82.92 euros and had grown by 3.2%.

Topics: vw

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