Analysts: Schaeffler refinancing its debt is a positive for Conti
Schaeffler AG, which currently controls what is effectively a 60 per cent stake in Conti, has announced plans for new credit worth around 8 billion euros. In addition to this refinancing, the company announced plans to issue 2 billion euros of bonds.
According to financial analysts at Morgan Stanley, this all comes around the same time as ratings agencies Stand & Poor’s and Moody's are planning to publish official credit ratings. And all follows Schaeffler’s decision to change its legal form into AG back in September 2011 in order to gain better access to capital markets.
Although Continental won’t be directly impacted by this development, according to Morgan Stanley, the announcement “further stabilizes the financial situation of Conti’s major shareholder thus decreasing risk factors” and “decreases the likelihood of a share placement by Schaeffler this March.”
So does this mean that Schaeffler is preparing to sell any more Continental shares before it is obliged to solidify its position? Schaeffler’s investor relations department is quoted as saying that the company is “comfortable with current ownership levels, has no intention to sell as of now and believe[s] Conti shares are undervalued at this price.” Nevertheless the sceptical reply of the Morgan Stanley investor’s note (published 27 January) was that “obviously these arguments can change rather quickly.” And this is not to say that disposing of more shares would be a bad thing in the analysts’ view. On the contrary “should Schaeffler decide to sell more Conti shares, we believe this will be a positive catalyst for Conti” Vikash Patel wrote in his analysis of the announcement, adding: “Private placement of the shares guarantees minimal disruption in the marketplace and would boost Conti…”
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