Bloomberg News

Volkswagen May Join Peugeot in Tapping ECB Bank-Rescue Cash

February 28, 2012

(Adds Renault, BMW from second paragraph.)

Feb. 16 (Bloomberg) -- Volkswagen AG and PSA Peugeot Citroen are among carmakers lining up to tap the cheap European Central Bank loans that are keeping the finance industry afloat.

Renault SA said it may also borrow from the ECB’s longer- term refinancing operation, which is open to financing units of Europe’s biggest auto companies because they have banking licenses. A total of 523 lenders borrowed 489 billion euros ($636 billion) of 1 percent three-year loans under the central bank program in December.

Volkswagen Bank GmbH is considering accessing the LTRO, Stefan Rolf, the head of securitization, said in an interview today. Peugeot’s Banque PSA Finance unit is in talks with the ECB about borrowing money and is offering more than 1 billion euros of collateral, Chief Financial Officer Jean-Baptiste de Chatillon said yesterday. Renault Chief Executive Officer Carlos Ghosn said he’d consider any cash “which is cheap,” while stressing the company didn’t need the money.

“The auto industry is a significant provider of credit to the economy and the ECB is keen to get credit flowing where it needs to flow,” said Huw Van Steenis, a bank analyst at Morgan Stanley in London. “If giving loans to car makers helps that process then the central bank may feel it’s a good use of the money.”

Cheaper Cash

For those companies able to access it, the ECB’s LTRO program is a cheaper source of cash than selling bonds.

Banque PSA’s last foray into the public debt markets was when it raised 700 million euros from an offering of notes due in July 2014, paying an interest coupon of 6 percent. Wolfsburg, Germany-based VW’s last offering was 250 million euros of three- year bonds sold on Feb. 2 with a 2.125 percent coupon, according to data compiled by Bloomberg. RCI Banque SA, a unit of Renault, France’s second-biggest automaker, last sold bonds in January.

“The conditions of the LTRO are very attractive and it’s our duty to carefully monitor our funding costs,” Volkswagen’s Rolf said. The company may borrow from the central bank “despite the fact that we have access to debt capital markets and deposits from retail clients,” he said.

Bayerische Motoren Werke AG, the largest maker of luxury cars, has access to the ECB facility through its banking unit, said spokeswoman Micaela Sandstede. She wouldn’t confirm whether the Munich-based company would access the funds.

An easing of collateral requirements in the next round of the ECB loan program later this month may help the carmakers’ financing units get the loans. An ECB spokesman declined to comment.

“We will access any source of financing which is cheap,” Renault’s Ghosn said in a Bloomberg Television interview today. What funding the company chooses is down to “cost” and “availability,” and “not because we’re desperately in need of cash,” he said.

--With assistance from Caroline Connan in Paris and Liam Vaughan in London. Editors: Paul Armstrong, Michael Shanahan, Andrew Reierson

To contact the reporters on this story: Ben Martin in London at bmartin38@bloomberg.net; Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net


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