Bloomberg News

Porsche Bonds Increase Most in Four Months After Volkswagen Deal

July 05, 2012

Porsche SE’s bonds rose the most in more than four months after Volkswagen AG (VOW) agreed to buy the 50.1 percent stake in the sports carmaker’s automotive business that it doesn’t already own.

Porsche’s 3.875 percent notes due 2016 rose 1.38 cents to 107.39 cents on the euro, according to Bloomberg Bond Trader prices at 11:45 a.m. in London. That’s the largest intra day move since February 14, when the bonds jumped 5.22 percent after plummeting 5.04 percent the previous day.

The yield relative on the securities to the benchmark swap rate fell 36 basis points to 82 basis points, the lowest since April 10, the data show. That compares with an average 139 basis-point spread for European auto companies, including Peugeot SA and Daimler AG, Bank of America Merrill Lynch’s Euro Automotive Index shows.

The 4.46 billion-euro ($5.6 billion) cash deal ends a seven-year saga that divided two of Germany’s most powerful families. The two companies agreed to combine three years ago after Stuttgart-based Porsche racked up more than 10 billion euros of debt in a failed attempt to take over Volkswagen, Europe’s largest carmaker.

The cost of insuring Porsche’s bonds against losses for five years also fell with credit-default swaps dropping 13 basis points to 147, according to data compiled by Bloomberg. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower renege on debt agreements.

Porsche also said it will use part of the 4.46 billion euros to repay 2 billion euros of bank debt.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.


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