Supplier Continental has wrapped up its EUR1.1bn (US$1.6bn) capital increase that will be used to pay down debt.
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The company said in a statement that the money raised would help “to reimburse a EUR3.5bn ($5.1bn) tranche of credit that comes due in August”.
The group has been heavily in debt since it bought Siemens’ VDO electronics unit in mid 2007. Its capital increase includes a placement of 31m new shares via a consortium of banks led by Deutsche Bank, Goldman Sachs and J.P. Morgan, the statement said.
Continental shareholders have until 21 January to exercise subscription rights and the group’s new shareholder structure is to be unveiled at the end of the month. Schaeffler Group, which owns 49.9% of Continental and controls 88.9% of its capital with partners, will not participate in the rights subscription.
Both companies carry large debts and plan to merge in the medium term, working together in the meantime on joint projects. Continental’s debt was EUR9.5bn ($13.8bn) last 30 September while Schaeffler owed around EUR10bn ($14.6bn) last April.
Last August Schaeffler announced a financing deal valid up to six years worth roughly EUR12bn ($17.5bn).
Financial Times Deutschland said Continental would not pay out dividends for 2009 and 2010, according to the prospectus for the planned capital increase.
The newspaper added that Conti probably would not distribute dividends until August 2012 as it has to comply with conditions of the refinancing agreement signed with 50 creditors shortly before Christmas.
