Syndication of Schaeffler's Conti loan on hold
Automotive News Europe
London - Syndication of the Euro 16 100 million ($21.92 billion) loan backing the bid by ball bearings supplier Schaeffler for German car parts manufacturer Continental is on hold due to disruption in the credit markets, two bankers close to the deal said on Tuesday.
The loan was on hold while privately owned Schaeffler assessed its position after securing an unwanted majority stake in Continental, and syndication of the loan would resume when there was some clarity on Schaeffler's strategy, the bankers said.
"There are a number of things going on with regards to the tender of shares, with regards to the closing of the offer and the future strategy of the company which are all being considered, and until that is not settled there is not much point asking banks for commitments," a banker close to the deal said.
"We will look to come back to banks once those details are finalised, which we expect to do at some point in the near future," a second banker close to the deal said.
The loan was launched to senior banks in July but failed to gain critical support as the intensifying credit crisis derailed Schaeffler's merger and acquisition strategy and saddled the company with an unwanted majority stake as equity prices slumped.
The loan, arranged by Bayerische Hypo-und Vereinsbank, Commerzbank, Dresdner Kleinwort, Landesbank Baden-Wurttemberg, Royal Bank of Scotland and UBS, initially backed the acquisition of a 49.99 minority stake in Continental.
With syndication of the loan on hold, other syndicates said it was likely the six arranging banks might have to provide the funds as a bridge loan to asset sales before re-launching the deal after the disposals with revised terms and conditions.
Schaeffler was shouldering the full acquisition debt after securing an unwanted 90.19 percent majority stake in Continental in late September after equity markets tumbled.
Bankers said Schaeffler agreed to limit its stake in Continental to 49.99 percent to avoid having to refinance a Euro 13 500 million loan that backed Continental's acquisition of VDO, and Schaeffler has said that it planned to sell the excess shares back to banks.
When Schaeffler's loan was launched in July banks were invited to commit Euro 700 million. The loan was expected to decrease in size depending on how many Continental shares Schaeffler secured, but an unusual corresponding decrease in fees proved unpopular with banks, bankers said.
Full fees were payable if the loan totalled more than Euro 10 000 million, but then ratchet down by 50 basis points for a loan of Euro 7500 million or less, banking sources said.
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Continental/Schaeffler article from Automotive News Europe (A Crain Publication)
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