Continental AG : Continental Successfully Refinances
01/23/2013| 04:28am US/Eastern
New agreement on €4.5 billion syndicated loan signed
Terms through 2016 and 2018 further improving Continental's debt maturity profile
Higher degree of security thanks to geographically broader consortium of banks
Hanover, January 23, 2013. The international automotive supplier Continental has signed a new syndicated loan agreement, thereby further improving its debt maturity profile. Committed to by approximately 30 domestic and international banks, the credit amount has been reduced slightly. It now totals €4.5 billion and is split up into two tranches of differing duration - a loan in the amount of €1.5 billion, with a term of three years, and a five-year revolving credit line in the amount of €3 billion. For the new syndicated loan, Continental has been able to obtain the release of the asset collateral previously put up for the financing and has also implemented further simplifications with regards to the documentation.
The new loan agreement not only improves our financing and debt maturity profile but also puts our financing on a geographically broader footing, reported Continental CFO Wolfgang Schäfer following the signing of the new agreement, adding: This will enable us to better absorb regional fluctuations in the global capital market environment in the future and generally respond more flexibly to volatile markets. The great trust that the banks have again demonstrated gives us renewed confidence that with our long-term strategy, we are pursuing the right path for Continental.
Mainly by launching five bonds and generating free cash flow (FCF), the DAX 30 company had, in the interim, been able to reduce almost €9 billion off the original €13.5 billion syndicated loan agreed in 2007. In the last three years, the company's net indebtedness has dropped by more than €2.5 billion. At the end of the 3rd quarter of 2012, it stood at €6.8 billion. The gearing ratio (net indebtedness divided by total equity) amounted to 78 percent at that point in time. Continental closed the third quarter of 2012 with unused credit line commitments in the amount of just under €2.6 billion. Up until then, the company had availed a mere €602 million of the €2.5 billion revolving credit line under the terms of the previous syndicated loan.
On March 7, 2013, Continental will present preliminary figures for fiscal year 2012 at its Annual Press Conference in Frankfurt/Main.
Conit is finally getting back on track an becoming worldleader again, but I still think they are in debt an so is Schaeffler which was not said in the comments. But I can agree that both companies are set for 2013.
Refinancing the company is a very good decision by Continental as this will restructure the company positively, apart from that, it will prevent the company from bankruptcy to some extend. It is important to stated here that, it is good for Continental took follow the foot step of her parent company, Schaeffler. Schaeffler also sold 10% of Continental stake last year to refinance her debt.
Refinance the company will create a better image as it won't be easily going bankrupt. Like Schaeffler group also refinanced her debt in last Sep by selling 10% of Continental stake. Schaeffler group could have more cash flow for further investment, reducing her debt and enhancing the cash flow status. Hence, the rating of Schaeffler group is raised, by Moody. I guess Continental would also have the same case as Schaeffler group.
I agree. I also just saw today that, after the recent amalgamation with SK Innovation, now known as SK Continental E-motion, they will be jointly developing, producing and distribute lithium-ion battery systems. Maybe now we will see the development of a battery for EV's that can go the distance without having to be recharged constantly. I am from the UK and the problem here for purchasing an EV is just that. Interestingly enough, I was looking at an article about a concept vehicle produced by The Schaeffler Group called the Schaeffler Hybrid, based on an Opel Corsa, which is part of an innovative project that allows a comparison between the multiple new energy mobility options whilst demonstrating various vehicle configurations and driving conditions. In addition to the Corsa's internal combustion engine, the car uses a central electric motor and two wheel hub motors. There is a 16 kWh lithium-ion battery (400V, 400 A), which can be charged using the vehicle's own kinetic energy recovery system. So all we need now is for countries to start providing sufficient charging points and the future for EV's is looking great.
With the change in economy, it is always wise to refinance debts. Continental's success in restructuring will help achieve more profitability due to restructured debt profile. We might recall that months back Schaeffler also sold some of its share of Continental and reduced debt to 3.5 billion euro. I believe both Continental and its major shareholder, Schaeffler, are on good track and they will remain profitable in future.
Continental always seems to use it's loans wisely which ensures that they are put to good financial use. For example, I see that Continental has just bought out the UK company ASL Vision, based in Lewes, East Sussex. A very wise use of funds as this must surely put them ahead in the field of 360-degree surround vision. When Schaeffler, their largest shareholder, sold around 10% of their shares in Conti back in September, it certainly proved beneficial to both companies as Schaeffler was also able to restructure their own loans whilst still remaining Continental's largest shareholder. I find it rather interesting to note that both companies, whilst making shrewd investments appear to be following a similar path. Currently I see they are both opening plants in Russia. Schaeffler, although having had a presence in Russia since 1997, are opening their first production plant. For Continental it is relatively new territory Continental are also joining Schaeffler in Hungary. Very smart moves as they will be taking advantage of the lower overheads and wages whilst still maintaining a strong presence in the rest of Europe. Well worth watching these two companies as they seem to spot the emerging markets early and then others follow !!