Chinese carmaker Geely is seeking at least $1bn in loans from the country’s banks to finance its $1.8bn bid for Volvo, local news agency sources have said.
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At least three major banks including Bank of China, China Construction Bank and Export-Import Bank of China had agreed to extend loans to Zhejiang Geely Holding Group, banking sources told Reuters.
They added that money is not a problem for Geely. “They definitely have strong support from Chinese banks and there are a number of private equity funds queuing up to invest in Geely.”
Export-Import Bank of China is a policy lender wholly owned by the Chinese government and directly led by the cabinet. Bank of China is China’s top foreign exchange lender. China Construction Bank is the country’s top property lender.
Geely last week reached agreement with Volvo’s current owner, Ford, over intellectual property rights issues, seen as the major barrier to the deal. The two are now discussing long-term strategy for the Swedish carmaker’s sales and production. Analysts and industry sources expect the deal to be finalised by early next year.
Last month, Volvo’s union leaders held their first talks with Geely but were still waiting to see Geely’s finance plans for the loss-making Swedish carmaker.
Geely declined to comment on loan plans. All the three Chinese banks involved said they would not comment on specific loans to clients.
The loans backing Geely’s bid for Volvo are expected to have five-year terms, Reuters’ sources said. They added that currently, no foreign banks are involved but it is possible Geely may tap one or two foreign banks for some lending contributions in an effort to downplay Western concerns that financing is largely dependent on Beijing.
Standard Chartered and HSBC Holdings are Geely’s principle banks, according to its annual report. Bohai Industrial Investment Fund, a private equity fund backed by the Chinese government, was also in talks with Zhejiang Geely Holding Group, the parent of Hong Kong-listed Geely Automobile, to support its bid for Volvo, said the sources.
In September, Goldman Sachs invested $334m in Geely Automobile, although the carmaker said this money would mainly support its domestic car plant expansion.
Ford and Geely have not disclosed a possible sale price for the Volvo deal yet but media reports had put it closer to $2bn than the $6.45bn Ford paid for Volvo in 1999.
