Volkswagen Scandal Spells Trouble From IPOs to Credit Market

Updated on
  • Notes tied to VW loans said to be cut from Bank of France list
  • Parts supplier planning IPO faces questions on diesel scandal

The Long Road Ahead for Volkswagen

A week after it admitted to cheating on U.S. emissions tests for years, Volkswagen AG’s pain is beginning to spread throughout Europe’s credit markets.

The Bank of France stopped trading two securities backed by Volkswagen auto loans on Friday, while executives of parts supplier Schaeffler AG found themselves fielding questions about their biggest customer as they drum up support for an initial public offering, according to people familiar with the matters.

Since Volkswagen admitted Sept. 18 that it had cheated on U.S. air pollution tests since 2009, its chief executive officer resigned, the company became the target of a joint investigation by 27 U.S. states and the stock price tumbled 28 percent.

Matthias Mueller, the former Porsche chief who was appointed Volkswagen’s CEO Friday, said his most urgent task is to win back trust for the company. “Under my leadership, Volkswagen will do everything it can to develop and implement the most stringent compliance and governance standards in our industry,” he said in a statement.

On Saturday, Suzuki Motor Corp. said it sold all the shares it held in Volkswagen to Porsche Automobil Holding SE, following the end of a four-year dispute over a failed partnership with VW.

Purchase List

The two Volkswagen-related securities weren’t in an updated list the Bank of France distributed on Friday after being included in the original version sent to investors earlier this week, said the people, who asked not to be identified because they aren’t authorized to discuss the matter publicly.

The Bank of France is buying asset-backed securities under a European Central Bank purchase program designed to help boost lending in the euro area. An official for the Paris-based bank declined to comment on the purchase-offer list.

Volkswagen Financial Services has 22.8 billion euros ($25 billion) of outstanding asset-backed debt, according to a September presentation on its website. Marc Siedler, a spokesman for the finance unit, declined to comment in an e-mailed statement.

IPO Valuation

Herzogenaurach, Germany-based Schaeffler announced IPO plans on Monday. Concerns about the impact of the Volkswagen issue, as well as Chinese and global market volatility, could affect investor views on the IPO valuation, according to the two people.

A representative for Schaeffler declined to comment.

The company is planning to set a price range for the offering as soon as Monday as it crisscrosses Europe to market the shares to investors from London to Zurich, the people said.

Insignificant Impact

Schaeffler is telling investors that its products aren’t involved in the scandal and any decline in Volkswagen car production will have an insignificant impact on sales, according to two of the people. The automotive supplier is also saying that it’ll benefit from a possible shift to hybrid and more efficient gas vehicles because its products help meet higher technology demands, they said.

An IPO could raise as much as 3 billion euros, people familiar said on Monday.

Schaeffler, which competes with SKF AB of Sweden and Timken Co. in the U.S., plans to list a stake of about 25 percent in Frankfurt by selling as many as 166 million new and existing shares, it said in a statement on Sept. 21. Initial trading is targeted for Oct. 5, it said in a separate presentation.

Meanwhile, Volkswagen is readying a plan on how to fix the 11 million cars affected globally by the emissions scandal and will present it “in the coming days,” Peter Thul, a spokesman for the company, said Saturday. The repairs will be free for customers, whom the carmaker will contact “very promptly,” he said.