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VW secures loan against key assets

On the block: While the sale of ‘shiny’ assets like Bentley and Lamborghini are unlikely, the VW Group has put them on the table to secure funding.

Huge bank loan taken out against VW Group’s key assets to fund diesel crisis

Volkswagen logo8 Dec 2015

By TIM ROBSON

THE Volkswagen Group has moved to shore up its finances as the diesel emission crisis rumbles on, with the company securing a huge 12-month line of credit against some of its key assets.

Reuters has reported that a €20 billion ($A30b) line of credit has been approved across a tranche of 13 European financial institutions, including Citigroup and UniCredit, with the company reportedly required to offer assurances of asset sales to cover the loan if required.

VW will reportedly offer a bond issue to service the loan, despite the scandal devaluing its current bond stocks and reducing its stock market value.

The company’s market valuation is estimated to have dropped by more than €11 billion ($A17 billion) in less than three months, while ratings agency Standard & Poor’s has just downgraded the company’s long- and short-term corporate credit rating from A to A-minus – the second fall since September.

One of the most likely items on the potential auction sheet is the non-trucking elements of the MAN company, which builds and sells ship engines, power plants and propulsion systems and is by far the most profitable part of the MAN business at present.

The division, valued at €5 billion ($A8b), has made €101 million ($A150m) profit so far in 2015.

Audi and Porsche are unlikely candidates for sale, while the group’s niche brands – Bentley, Lamborghini and Ducati – would likely net inconsequential returns if sold, thanks to low unit sales and high overheads.

However, Reuters suggests that all three are included in the loan agreement.

Costs continue to rise as the scandal moves into its fourth month, with sales declines in key markets, United States and European production lines being hurriedly reset to build more petrol vehicles and a worldwide engineering program to fix up to 12 million vehicles kicking off in less than a month’s time.

Meanwhile, the reclusive chairman of supervisory board of Porsche Automobil Holding SE, Wolfgang Porsche, has told the company’s workforce that he believes VW can weather the current storm.

“I am of the rock-solid conviction that Volkswagen can weather the situation and emerge even stronger from the crisis,” the 72-year-old grandson of VW founder Ferdinand Porsche said at a staff meeting in Wolfsburg late last week.

“No one here is giving into panic.

“No one can believe that the emissions scandal will pass by like a sudden thunderstorm. Everyone at Volkswagen now needs to act decisively.”

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