Continental Completes ‘First Step’ of Refinancing Package

Continental AG reports having already successfully completed the first “key steps” of its overall plan to improve its current financing structure and capital structure following the signing of loan agreements on December 19. The German tyre and automotive components supplier states that “important” amendments have been made to the existing loan agreements, allowing for the repayment of the 3.5 billion euro tranche due in August 2010 inter alia by a forward start facility (FSF) while also providing further flexibility. At the same time, the company has received FSF commitments in excess of the requested 2.5 billion euros, which has resulted in an over-subscription of their bank group’s request.

With the successful conclusion of negotiation with the banks, Conti says the next step in its refinancing is to implement the integrally related capital increase. This increase has anticipated gross proceeds of at least one billion euros. Continental’s ability to draw under the FSF is conditional upon the successful implementation of such a capital increase. As already announced, Conti intends to implement the capital increase in the first quarter of 2010. Subsequently, the company plans to assess and – if appropriate –implement further measures on the financial markets with a view to further optimising maturity terms.

“Although Continental has done a very good job reacting to the global crisis, especially in generating and maintaining liquidity, as a direct consequence we still needed to address the maturity in 2010 as well as the financial covenants related to the maturity structure. Our overall refinancing concept gives Continental the needed flexibility to emerge strongly from this crisis and therefore we are pleased to see the confidence shared in our company by our bank group in clearly supporting these very important first steps,” said Continental Executive Board chairman Dr. Elmar Degenhart. “Now comes the next stage with the capital increase, which we are tackling in the same structured and rigorous manner. An experienced team of internal and external specialists is fully concentrated on preparing the capital increase, and the preparations are well underway. We are confident that the further planned steps in this programme will be successfully implemented and we appreciate the support of our banks in this process. In the beginning of the New Year, we anticipate making further announcements as we implement further steps to successfully recapitalise Continental.”

The Continental Corporation had taken a syndicated loan to finance the acquisition of Siemens VDO in the summer of 2007. After the repayment of tranche A (in an amount of 800 million euros) in August 2009, tranche B (3.5 billion euros) is due for repayment in August 2010. Tranche C, totalling 5.0 billion euros, will fall due in 2012. On September 30, 2009, Continental had some 3.3 billion euros in liquidity reserves from unused credit lines, cash and cash equivalents at its disposal. The corporation’s net indebtedness was approximately 9.5 billion euros on September 30, 2009, approximately 1.3 billion euros lower than on September 30, 2008.