German Government to Restart Talks With Schaeffler

The German government is about to reopen support negotiations Schaeffler Group if, according to news reports, the company agrees to reorganise its financing with lenders. “When there is such a plan, there will be further negotiations,” Economy Ministry spokesperson Steffen Moritz told Bloomberg in an email.

Meanwhile, Abu Dhabi’s International Petroleum Investment Company (IPIC) sovereign wealth fund is reportedly considering taking a stake in either Schaeffler Group or Continental AG, according to Financial Times Deutschland. The unconfirmed reports suggest a stake of no less than 20 per cent and “probably” more than 25 per cent in one of the two companies is being considered.

Earlier the same day, Bloomberg reported that Schaeffler might be planning a debt-for-equity swap if German government support or other investment is not forthcoming. According to the report, banks led by Royal Bank of Scotland Group Plc may swap debt for some of the shares in the family company owned by Maria-Elisabeth and Georg Schaeffler. The move is seen as something of a last resort as banks are likely to struggle to find buyers in the midst of the downturn in the automotive market. “Everything’s up for grabs, but asset sales will be hard to pull off in the current environment…The banks control Schaeffler’s destiny” Bloomberg quoted Nomura Securities’ Michael Tyndall as saying.

RBS, along with UBS AG, Commerzbank AG, Dresdner Kleinwort, Landesbank Baden-Wuerttemberg and UniCredit SpA’s HVB Group unit, financed Schaeffler’s purchase of 90.2 percent of Continental AG.

Market observers continue to speculate, as they have since Schaeffler’s initial approach in the summer of 2008, that Continental’s historically profitable tyre and rubber business would be easiest to sell. The suggestion is that Conti Tire, Europe’s second-largest tyremaker, may have a realistic selling price of between 6 and 7 billion euros, and could be sold towards the end of 2009 at the earliest.