Porsche puts hand out for another loan

PORSCHE is seeking another €1.75 billion ($A3 billion) in credit to help cover repayments for Volkswagen shares bought during its ambitious take-over bid of Europe’s largest motor manufacturer.

The company says it is negotiating with several German banks, including the state-owned KfW development bank, for the loan, which would take its borrowings to €12.5 billion ($A22.1 billion).

Last week, Porsche said it had obtained a €700 million ($A1.33 billion) loan from Volkswagen, but needs to get more to cover its commitments, even if it means dipping into the KfW-controlled, German government-funded €40 billion ($A70 billion) stimulus fund to help companies that can’t get finance from usual sources due to the credit squeeze.

The normal ceiling on these loans is €300 million ($A530 million), so an application for €1.75 billion will come under scrutiny.

The request for more money also has raised concerns in Europe about the ability of the premium sportscar-maker to meet its debt obligations.

However, Porsche says its borrowing requirements are sustainable and the company is not on the verge of bankruptcy.

It also announced that its sales decline in the important US market had eased, with volumes rising for the past three consecutive months. While they are still 29 down on the previous year, the upswing has raised hopes that the worst might be over.

Porsche began pursuing VW in 2007, buying share options on €9 billion of borrowed money, with an ambition to own a 75 per cent stake in the bigger company.

But by the time it had grabbed a 51 per cent voting stake, the situation had began to unravel under the weight of the global financial crisis and feuding between major shareholders, including the German state of Lower Saxony and descendents of Porsche founder Ferdinand Porsche, as well as resistance from VW chairman Martin Winterkorn.

The two companies are currently negotiating a merger, which will see Porsche operate as a stand-alone manufacturer under the VW Group umbrella.

If the deal can be sealed, Porsche will be one of 10 automotive brands in the group, which also includes Seat, Bentley, Skoda, Audi, Lamborghini and Bugatti.

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