UPDATE: Continental AG Plans 5-Year Bond Of At Least EUR500M

5th Jul 2010 12:07

By Christoph Rauwald Of DOW JONES NEWSWIRES FRANKFURT (Dow Jones)--German auto parts and tire maker Continental AG (CON.XE) said Monday it will launch a euro benchmark bond worth at least EUR500 million with a maturity of at least five years. "[Continental] has mandated a bank consortium led by Citi and the Royal Bank of Scotland to offer and sell euro-denominated notes to qualified investors internationally," the Hannover-based company said in a statement. At 1013 GMT, Continental shares traded up 0.3% at EUR43.45, while the MDAX mid-cap index traded up 0.2%. The company said a final decision on the issue amount and pricing will be made at the end of investor roadshows that will take place between July 6-9. "The continuing positive trend on automotive markets as well as the current situation on financial markets enables us to move ahead with the refinancing strategy we initiated in 2009," Continental Chief Financial Officer Wolfgang Schaefer said in a statement, adding that this first placement of a euro benchmark bond will improve the company's debt maturity profile. Continental had said in its January prospectus for its EUR1.1 billion capital increase that it planned to issue the high-yield bond during the first six months this year. But volatile market conditions caused by sovereign debt concerns made it difficult for issuers to launch deals. Continental has said in recent months that it isn't under any time pressure to issue the bond and aims to wait until market conditions are appropriate. Its high-yield deal represents the third phase in the company's financial restructuring. The first saw the company's lenders agree to a forward start agreement that extended the maturity of EUR2.5 billion of an original EUR3.5 billion loan to August 2012 from 2010. The second part involved the company raising EUR1.1 billion through the capital increase earlier this year. Continental and its dominant shareholder, closely held ball bearings maker Schaeffler Group, plan to merge operations. But both companies are still squeezed by huge debt after Schaeffler's stake building in Continental, and Continental's acquisition of Siemens AG's (SI) automotive-electronics division, VDO. Continental's net debt stood at EUR8.23 billion at the end of the first quarter. In June, CFO Schaefer said he aimed to relocate a part of the company's debt from banks to the capital market and planned to issue bonds worth up to EUR4 billion in addition to the high-yield bond. Continental in its first-quarter earnings release said it will have little room to reduce its net debt this year, adding that it expects to have more financial muscle for cutting debt next year and in 2012, in particular. -By Christoph Rauwald, Dow Jones Newswires; +49 69 29 725 512; [email protected] (Carol Dean in London contributed to this article.) (END) Dow Jones Newswires July 05, 2010 07:07 ET (11:07 GMT)