Schaeffler refinances 3.5 billion euros of debt

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MADRID (Bloomberg) -- German supplier Schaeffler said it had refinanced about 3.5 billion euros ($4.9 billion) worth of debt, including new bond issues of about 2 billion euros, as borrowing costs approach record lows in Europe.

The company is marketing 2 billion euros of notes in euros and dollars and is seeking to replace about 1.6 billion euros of loans, it said in a statement on Tuesday.

Schaeffler, the largest shareholder of fellow supplier Continental, reduced net debt to 5.9 billion euros at the end of December from a peak of more than 10 billion euros shortly after its takeover of a majority of Continental in 2009.

"Schaeffler has delivered and performed well over the last few years," said Roman Gaiser at Pictet Asset Management in Geneva. "It makes sense to come to the market now, extend maturities and potentially cheapen up their funding."

The company plans to issue secured notes maturing in five, seven and eight years and five-year unsecured bonds through its Schaeffler Finance BV unit. The secured notes will be rated Ba2, or two levels below investment grade, while the unsecured bonds will be graded two steps lower at B1, Moody's Investors Service said in a statement on Tuesday.

Use of proceeds

Part of the proceeds will be used to redeem some of Schaeffler's existing notes. The yield on the company's 600 million euros of senior secured bonds sold in April 2013 is 3.2 percent compared with 4.25 percent at issue, Bloomberg bond prices show.

The fundraising will also be used to pay an antitrust fine, according to a source, who asked not to be identified because they're not authorized to speak about the matter.

Schaeffler is among five bearing producers that agreed in March to pay a combined 953.3 million euros to settle a European Union probe into an automotive-parts cartel.

Schaeffler plans to replace its dollar- and euro-denominated term loans paying 325 basis points and 375 basis points above benchmark rates with a new six-year loan in the same currencies paying margins of 300 basis points and 325 basis points, a person familiar with the refinancing told Bloomberg on April 25.

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