Reports: Continental Refinancing ‘Will Be Done By Christmas’

Continental AG is aiming to complete the refinancing negotiations of its syndicated loan before Christmas, Reuters quoted sources “familiar with the matter” as saying. Further reports suggest Continental is opting to pay a higher interest rate in exchange for postponing a 3.5 billion euro payment due in August next year. Instead the automotive supplier is expected to use a 1 billion euro capital increase and extend the remaining 2.5 billion in loan payments, “temporarily eliminating any need to raise cash via the disposal of its Rubber Group activities” according to Reuters.

Meanwhile Conti’s 90 per cent shareholder, Schaeffler Group, is blocking further equity raising beyond the 1 billion euros planned in order to prevent its holding being reduced lower than 75 per cent.

“We want to have our refinancing package including the rights issue completed within the first quarter of 2010,” Continental spokesman Hannes Boekhoff told Bloomberg News. According to Bloomberg’s report, the new loan will mature in August 2012. The existing facility has an interest margin of 46.25 basis points to 56.25 basis points more than the euro interbank offered rate, or Euribor, according to data compiled by Bloomberg.