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Continental AG Signs $6 Billion Syndicated Loan Accord

Continental AG (CON), Europe’s second- largest auto-parts supplier, signed a new syndicated loan agreement to refinance debt and extend its maturity.

The company has arranged a loan totaling 4.5 billion euros ($6 billion), “slightly” reduced from the previous figure and divided into two portions, the Hanover, Germany-based manufacturer said in a statement today. The debt, replacing a loan maturing in April 2014, involves about 30 German and international banks, it said.

“The new loan agreement not only improves our financing and debt maturity profile but also puts our financing on a geographically broader footing,” Chief Financial Officer Wolfgang Schaefer said in the statement.

Continental is preparing for slower revenue growth this year after achieving record sales of 32.7 billion euros in 2012. The company, which is also Europe’s second-largest tire maker, expects a 5 percent revenue increase in 2013 compared to growth exceeding 7 percent last year.

A contraction in the Europe car market may also weigh on the company’s profitability. Continental forecast on Jan. 14 that adjusted earnings before interests and taxes in 2013 will amount to at least 10 percent of sales, declining from a margin of 10.7 percent last year.

Following Customers

A focus on more complex components such as injection systems and safety sensors has helped Continental counter a decline in the European car market that’s forecast to extend into a sixth consecutive year in 2013. The manufacturer followed German carmakers into the booming market in China and to the U.S. to supply local production.

Continental fell as much as 1.1 percent to 83.68 euros and was trading down 0.2 percent at 10:45 a.m. in Frankfurt. The stock has gained 41 percent over the past 12 months, valuing the company at 16.9 billion euros.

The new agreement with banks includes a three-year term loan amounting to 1.5 billion euros, and 3 billion euros available in a five-year revolving credit line, the company said. Continental is now released from collateral required under earlier borrowing terms and documentation will be simplified, the manufacturer said.

The initial loan for Continental’s acquisition of the VDO car-electronics unit from Siemens AG (SIE) in 2007 stood at 13.5 billion euros. Net debt was 6.8 billion euros by the end of the third quarter and the company has a target of reducing that number further this year.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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