Continental Plans to Issue New Bond to Cut Interest Costs
Continental AG (CON) plans to raise at least 500 million euros ($642 million) with a new bond issue to help finance the early redemption of higher interest debt.
The debt will have a maturity of five years, the Hanover, Germany-based manufacturer said today in a statement. Volume and conditions of the issue will be determined in the “next few days,” the company said.
With the new bond, “we will be able to reduce our interest costs significantly and further improve the debt maturity profile at the same time,” Chief Financial Officer Wolfgang Schaefer said in the statement.
The German manufacturer has largely avoided the downturn in the European auto market by expanding in China and the U.S. and focusing on in-demand components such as safety sensors and fuel-injection technology. Continental forecasts sales to rise about 5 percent this year to more than 34 billion euros while predicting operating profit margins of at least 10 percent.
Continental said today it will buy back 1 billion euros of securities paying a coupon of 7.5 percent. The bond will be repaid on Sept. 16, four years ahead of its maturity date, the company said.
The move comes a week after Continental said it will redeem 750 million euros of 8.5 percent notes due 2015 starting on July 15. The bond redemptions are part a broader effort by the company to improve its financial profile, including refinancing a 4.5 billion-euro loan in January.
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