PSA Peugeot Citroen (UG), Europe’s second- biggest carmaker, traded at the lowest level in almost three decades after Citigroup Inc. (C) cut its recommendation on the stock because of the manufacturer’s struggles with cash.
Peugeot dropped as much as 5.1 percent to 4.51 euros and was trading down 4.3 percent at 2:41 p.m. in Paris, valuing the company at 1.61 billion euros ($2.05 billion). The stock sold today at the lowest price since 1985, when it traded at 2.21 euros, according to data provided by the exchange operator NYSE Euronext.
The manufacturer said in July that it had been burning through about 200 million euros in cash monthly at its automotive unit for the past year. Liquidity at Paris-based Peugeot may become stretched by the end of 2014, analysts at Citigroup, including Philip Watkins in London, said today in a research report. The bank reduced its recommendation on Peugeot to sell from neutral, and lowered the stock-price estimate by more than half to 3 euros from 8.50 euros.
The carmaker said in October that net debt at the end of 2012 will widen to about 3 billion euros, from a target set in July of 2.5 billion euros, as industrywide auto sales in Europe head for the biggest drop in 19 years. Moody’s Investors Service cut Peugeot’s long-term debt rating to three levels below investment-grade on Oct. 10, adding pressure on its banking unit, Banque PSA Finance, which is still rated investment-grade.
France’s government stepped in on Oct. 24 to rescue Peugeot by guaranteeing as much as 7 billion euros in new bonds in exchange for greater influence over company strategy. The automaker needed the French state backing for the banking unit to keep down borrowing costs and offer customers competitive financing rates.
The state and workers will each receive a seat on the board of directors, and an outside committee will be set up with veto power over any “significant” changes in Peugeot’s operations, the French Finance Ministry said.
To contact the reporter on this story: Mathieu Rosemain in Paris at firstname.lastname@example.org