Schaeffler unveils major refinancing scheme

By Alexander Huebner and Philipp Halstrick

FRANKFURT (Reuters) – Schaeffler unveiled a major refinancing plan through which it aims to chip away at its debt pile, by selling some of its shares in Continental AG (CONG.DE: Quote, Profile, Research) currently parked at banks.

The banks M.M.Warburg and Metzler — which have so far held Continental shares on Schaeffler’s behalf — will sell up to 30 million shares in Continental in an accelerated bookbuild offering, the family-owned ball-bearings maker said in a statement on Sunday.

“On the basis of the agreement Schaeffler will significantly reduce the financial debt of the holding company,” it added.

Following the share placement, the increased free float and improved liquidity in the stock will position Continental as a candidate for a re-entry into the DAX 30 index, the group said.

Interest rates and maturities of Schaeffler’s remaining loans will also be improved significantly through the deal.

In addition, Schaeffler said it plans to buy back a further 15.5 million Continental shares from the two banks, increasing its direct stake in the company to 49.9 percent from 42.2 percent. Its total stake including shares parked at the banks will then amount around 60 percent, down from 75 percent.

All three parties have agreed not to reduce their respective participations in Continental further over the next 12 months.

Schaeffler took control of the much larger German auto supplier Continental about two years ago after launching a hostile $18 billion bid in which it ended up collecting more shares than it could afford, lumbering itself with billions of euros of debt.

Schaeffler and Continental had originally planned to merge their businesses but Schaeffler Chief Executive Juergen Geissinger last year backed away from committing to a deal any time soon.

A merger would have created an automotive supplier with more than 30 billion euros ($39.5 billion) in annual sales and about 200,000 employees.

The two German companies were at odds for months on the matter and any major move may still be slowed down by the fact that it would have to be approved by five banks that loaned privately held Schaeffler 12 billion euros.

Earlier this month, Financial Times Deutschland reported Schaeffler was working on a plan to sell some of its shares in Continental this month, citing sources.

In the statement on Sunday, Schaeffler said that it would “continue to examine all strategic options to intensify further the close cooperation with Continental.”

(Additional reporting by Josie Cox, Arno Schuetze, Jan Schwartz; Writing by Josie Cox; Editing by David Holmes)

Schaeffler unveils major refinancing scheme