 "Volkswagen")
Volkswagen AG is working with banks to put together as much as euro 20 billion ($21.5 billion) in short-term bridge financing to show that the auto maker has adequate liquidity to weather the emissions cheating crisis, two people familiar with the matter said.
VW does not need the money currently and is seeking extra funds to create a financial cushion, said the people, who asked not to be identified discussing private talks. The auto maker will begin meeting with about a dozen prospective banks on Monday at its headquarters in Wolfsburg, Germany, to go over the proposed funding, which it aims to have in place before the end of the year, the people said.
"We have always considered that a well-diversified portfolio of funding tools gives us the necessary flexibility to offer appropriate and competitive financing options for our customers as well as our industrial investment needs," Volkswagen said in an e-mailed statement to Bloomberg, declining to give further details. "It is perfectly normal that we are in a constructive ongoing dialogue."
The scandal has spread since Volkswagen first admitted in September to cheating on diesel pollution tests. The car maker will need to recall as many as 11 million diesel vehicles worldwide and admitted earlier this month that another 800,000 cars had unexplained inconsistencies in carbon dioxide output. By 2017, the price tag of VW's emissions woes will probably reach about euro 25 billion, Barclays estimated.
"It makes perfect sense" to shore up financing, said Sascha Gommel, a Frankfurt-based analyst for Commerzbank. "In order to protect their rating, they need to show that liquidity will never become an issue for them, because then you have a vicious circle."
UniCredit and Citigroup are among banks offering to lend about euro 2.5 billion each, people familiar with the talks said.
Volkswagen has the equivalent of euro 2.57 billion in bonds maturing this year, euro 14.3 billion in 2016 and euro 13.5 billion in 2017. The company said earlier that it has put bond financing on hold because it needs time to update its documentation to reflect potential penalties. Thus far, the auto maker has set aside euro 6.7 billion to recall diesel cars and estimated the economic risk of the CO2 irregularities at another euro 2 billion.
Volkswagen's automotive division had euro 27.8 billion in net liquidity at the end of the third quarter, with the car maker categorising about euro 10 billion of that as a buffer to support credit ratings. Fitch Ratings downgraded the company's debt by two levels on November 9, joining Standard & Poor's and Moody's Investors Service.
