REFILE-UPDATE 2-Porsche to raise $7 billion in capital–source

(Refiles to add dropped word not in 7th paragraph)

* To raise around 5 bln euros in equity capital

* Capital increase is condition for Volkswagen merger

* Porsche, underwriting banks decline comment
(Adds background, no comment from Porsche and banks)

By Philipp Halstrick and Edward Taylor

FRANKFURT, March 25 (Reuters) – Debt-laden German carmaker
Porsche will begin a 5 billion euro ($7.1 billion) capital
increase in the next few days, clearing the way for a merger
with Volkswagen, two sources close to the deal said on Friday.

Porsche Automobil Holding SE (PSHG_p.DE: Quote, Profile, Research) only earns
investment income from stakes in Porsche AG sports cars and
Volkswagen AG (VOWG.DE: Quote, Profile, Research) (VOWG_p.DE4: Quote, Profile, Research), and needs fresh equity
before being folded into Europe’s biggest carmaker. The
underwriters of the mammoth issue are Deutsche Bank AG
(DBKGn.DE: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) and other banks could
still join the syndicate, the sources said.

Porsche and the two banks declined comment.

The sources said the capital increase would raise a total
of 2.5 billion euros from the Piech and Porsche families, as
well as Qatar, all of whom hold ordinary shares.

The Piech and Porsche families will cough up 2.25 billion
euros between them, while 250 million euros will come from
Qatar, the sources said.

The rest of the 2.5 billion euros will be from owners
ofpreferred shares, they said, adding that, if the amount falls
below that figure, Qatar might also subscribe to the preferred
shares, even though it has not committed to do so.

“This step has already been approved. The capital increase
will start in the next coming days,” according to one person
familiar with the preparations.

Porsche SE finance chief Hans Dieter Poetsch said last week
that Porsche wanted to be an attractive investment in itself
and shareholders subscribing to the capital increase would
already get a payout in June, since the new shares would have
full dividend rights for the shortened fiscal year that ended
in December. [ID:nLDE72G0MI]

Poetsch has acknowledged events in Japan and the Middle
East meant it was not an ideal time to tap equity markets in
the next month or two.

Volkswagen chief executive Martin Winterkorn, who also
serves as CEO of Porsche SE, said two weeks ago that
preparations for the holding’s planned 5 billion euro ($6.9
billion) capital increase in the first half of this year to pay
down debt were “fully on schedule.” [ID:nLDE7290NJ]

Porsche SE has piled up net debts of 6.3 billion euros.
($1=.7062 euros)
(Additional Reporting from Alexander Huebner, Hendrik
Sackmann and Arno Schuetze; writing by Marilyn Gerlach; editing
by Greg Mahlich and Andre Grenon)

REFILE-UPDATE 2-Porsche to raise $7 billion in capital–source