Porsche Option Data May Not Have Swayed BNP, Court Told

BNP Paribas SA (BNP)’s 2009 decision to lend money to Porsche SE may not have been decisively influenced by all of the details of an option strategy the carmaker used in its Volkswagen AG takeover bid, a bank official testified.

Juergen Schlangenotto, who led the bank’s negotiations, said at the Stuttgart loan-fraud trial of ex-Porsche Chief Financial Officer Holger Haerter that the bank might still have granted the loan had data supplied by Porsche concerning the options and prices been different.

“Like a thousand other facts they were a part in the puzzle we looked at, but they were just one part of many,” Schlangenotto, a managing director at a German BNP Paribas unit, told the court today. “It’s impossible to say whether different numbers would have led to a different decision.”

Haerter is on trial with two other Porsche managers on charges they downplayed Porsche’s liquidity needs when negotiating with BNP Paribas about a 500 million-euro ($648 million) share of a 10 billion-euro loan. Prosecutors also claim they concealed 45 million put options on Volkswagen shares Porsche sold at the time.

All three rejected the charges on the first day of trial last month.

The case is part of a broader criminal investigation into Porsche’s unsuccessful hostile bid for Volkswagen AG (VOW) using derivatives. Stuttgart prosecutors are still probing Haerter and former Chief Executive Officer Wendelin Wiedeking over allegations of market manipulation and breach of trust.

Porsche Liquidity

According to prosecutors, Porsche sent a March 19, 2009 e- mail to BNP Paribas, which Haerter signed and the two other managers helped to set up. In the document, they understated Porsche’s liquidity needs by 1.4 billion euros, had all purchase options the company then held on Volkswagen shares been exercised, and didn’t mention an extra 45 million put options, prosecutors said.

Schlangenotto testified about information exchanged in early 2009 as part of the negotiations.

Haerter asked in the March 19 e-mail whether Schlangenotto “could live” with Porsche deleting two lines of an earlier draft that dealt with the average strike purchase prices of call options of 93 euros per share and left in only the net purchase price, which was set at 70 euros.

“That was enough for me, and I was happy everybody, including our risk department, were OK with that text,” Schlangenotto said. “We didn’t know the structure of the options and couldn’t calculate anything here anyway.”

4.1 Billion Euros

Schlangenotto understood the e-mail to say that Porsche needed to spend 4.1 billion euros if it eventually sought to increase its stake in Volkswagen by 20 percent to 70.8 percent, he said. That was the amount it needed to raise in the financing, he said.

“Had the numbers been different, we would have used the other numbers as part of our decision on the loan,” he said.

Prosecutors say Porsche should have stated that it needed another 1.4 billion euros, or 5.5 billion euros in total, to get the extra 20 percent stake.

Porsche spokesman Frank Gaube declined to comment.

Under German law, loan fraud doesn’t require that a creditor is actually deceived. The law punishes incorrect statements about the economic situation of a business that seeks a loan, regardless of the actual effect of the statement on the creditor.

Porsche and VW agreed to combine in 2009 after Porsche racked up more than 10 billion euros of debt in its unsuccessful hostile bid.

To contact the reporter on this story: Karin Matussek in Stuttgart via kmatussek@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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