PSA Peugeot Citroen will sign about 5.3 billion euros ($7 billion) of loans for its bank unit in the next week after lenders offered more than originally sought, according to two people with knowledge of the matter.
The refinancing, part of a 11.5 billion-euro deal to shore up the division’s finances, comprises a 4.1 billion-euro five-year term loan and a 1.2 billion-euro three-year forward-start facility, said the people, who asked not to be identified because the transaction hasn’t been announced. A forward-start deal extends the maturity of facilities before the debt expires.
The term loan was increased from 3.6 billion euros after attracting demand from lenders led by BNP Paribas SA, Credit Agricole SA, Natixis and Societe Generale SA, said the people. The remainder of the debt comprises loans agreed individually with banks, one of the people said.
The Paris-based company is taking steps to sustain its Banque PSA Finance division as Moody’s Investors Service is considering whether to cut the unit’s credit rating to junk because of slumping car sales. Chief Financial Officer Jean-Baptiste de Chatillon said Dec. 20 the company had reached an agreement with around 20 banks for the financing.
The company will pay interest of 370 basis points more than benchmark lending rates if its credit rating is cut to non-investment grade, the people said. Banque PSA’s outstanding three-year credit line signed December 2011 pays a margin of 160 basis points, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
Jean-Baptiste Mounier, a spokesman for Peugeot, declined to comment on the financing.
As part of the plan to shore up the banking unit, Peugeot also received 7 billion euros in guarantees from the French government to issue new bonds, allowing it to raise money at lower interest rates. The car maker still needs European Commission approval for the guarantees.