PSA bank unit gets temporary EU OK for bond guarantee
 |
Reprints
Print
Respond
BRUSSELS (Bloomberg) -- PSA/Peugeot-Citroen's finance arm was granted temporary European Union approval to receive a French government guarantee backing the issuance of 1.2 billion euros ($1.6 billion) of new bonds.
France must submit a restructuring plan covering the entire PSA group within six months to win final approval for the guarantee for Banque PSA Finance bonds, the European Commission said today in an e-mailed statement. The guarantee covers three-year bonds issued by the unit during the next six months.
While France agreed in October to shore up PSA's ailing banking unit with 7 billion euros in guarantees, it has only asked the EU to authorize the 1.2 billion-euro guarantee so far, Antoine Colombani, spokesman for EU Competition Commissioner Joaquin Almunia, told reporters in Brussels. A final decision by regulators would cover "all the aid given" to the company, Colombani said.
France must also justify the aid with the restructuring plan to show how the group and the unit plan to become profitable.
PSA, Europe's second-largest carmaker, after Volkswagen AG, needs the French guarantees to keep down borrowing costs, which impact the financing rates paid by customers. Peugeot said last week that net debt rose in the second half to 3 billion euros from 2.45 billion euros at the end of June. The automaker reports second-half earnings this week.
Falling value
Peugeot shares climbed as much as 2.2 percent to 6.12 euros and were up 1.9 percent at 6.10 euros as of 1:04 p.m. in Paris. The stock has plunged 55 percent in the last year, valuing the automaker at 2.15 billion euros.
Today's approval "will allow the bank to pay back this year's maturities of July and September -- 500 and 750 million euros," said Pierre Bergeron, a credit analyst at Societe Generale in Paris. "Now one needs to know what the commission will ask in terms of restructuring for the group and this remains unclear."
The EU must approve large government payments to companies and can impose conditions, including asset sales, to counter the advantage the aid gives the company over rivals. It can require that companies repay state aid if they don't follow the terms of the approval.
Job cuts
PSA's plan to eliminate 11,200 jobs and close a factory in Aulnay are on hold after a Paris court said last month that the automaker can't cut the positions until Faurecia SA, 57 percent-owned by PSA, fully informs its workers about the impact of the carmaker's restructuring. Automakers have announced more than 30,000 job cuts in Europe since July.
French Budget Minister Jerome Cahuzac last week floated the possibility of the government buying a stake in the automaker after it announced second-half writedowns of 4.13 billion euros.
Contact Automotive News
