Continental Said to Plan Up to 1 Billion Euros of Bonds to Refinance Debt

Continental AG, Europe’s second- largest auto parts supplier, is planning to sell as much as 1 billion euros ($1.3 billion) of bonds to refinance existing debt, according to two people familiar with the matter.

The Hannover, Germany-based company hasn’t formally hired banks to manage the junk bond issue, said the people, who declined to be identified before a deal is completed. Reuters reported the transaction earlier, citing sources it didn’t name and saying the coupon will probably be less than 8 percent.

Continental is seeking to extend maturities on more than 8 billion euros of bank loans it used to fund its acquisition of Siemens AG’s VDO unit in 2007. As part of that, it plans to sell as much as 4 billion euros of bonds and already issued 750 million euros of notes in July, according to data compiled by Bloomberg.

Standard & Poor’s rates Continental at B, five steps below investment grade, while Moody’s Investors Service grades the company one level higher at B1. High-yield, or junk, bonds are rated below Baa3 by Moody’s and BBB- by S&P.

Hannes Boekhoff, a spokesman for Continental, said the company is working on additional bond sales, while declining to confirm the amount or timing.

Continental, which is majority-owned by Schaeffler Group, issued 750 million euros of 2015 notes that yielded 8.75 percent on July 9, Bloomberg data show.

To contact the reporters on this story: Sonja Cheung in London at scheung58@bloomberg.net; Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

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