Siemens AG (SIE) is cutting borrowing costs as Europe’s biggest engineering company seeks a $3 billion credit line.
The company will pay a margin on the five-year revolving credit facility at 20 basis points more than benchmark rates, according to three people with knowledge of the terms, who asked not to be identified because the loan isn’t public. That’s 10 basis points, or 0.1 percentage point, less than it pays on a 4 billion-euro ($5.4 billion) revolver due 2018 it obtained last year, according to data compiled by Bloomberg.
Europe’s largest companies are raising more than $40 billion of credit lines to take advantage of lower interest rates from banks. Siemens joins German companies Daimler AG and Deutsche Post AG (DPW) which are also seeking to pay lower margins on new loans.
Commerzbank AG, Deutsche Bank AG and JPMorgan Chase & Co. are coordinating the fundraising for the Munich-based company, Hans-Peter Rupprecht, corporate treasurer of Siemens, said yesterday. The debt is being marketed to other lenders, he said.
A Siemens official, who asked not to be named citing company policy, declined to comment on the cost of the debt.
The company is offering a commitment fee, a payment on undrawn portions of the debt, equivalent to 35 percent of the margin while lenders that commit the maximum amount of $300 million will get an additional 23 basis-point up-front fee, the people familiar with the deal said. The revolving credit facility, a type of debt where money repaid can be borrowed again, includes a fee if it’s drawn, rising to 30 basis points if two-thirds of the credit line is utilized.
Siemens, which is rated Aa3 by Moody’s Investors Service, A+ by Standard & Poor’s and A by Fitch Ratings, was due to repay a $3 billion revolving credit facility last month, Bloomberg data show. That loan was obtained in 2006 and paid a margin of 15 basis points more than benchmarks.
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