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NINETY EIGHT REGENCY

VW may use bond issue to fund buying spree

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VW may use bond issue to fund buying spree

March 11, 2010 10:46 CET

WOLFSBURG (Reuters) -- Volkswagen AG may use a convertible bond issue rather than a chunk of new shares to help finance its acquisition spree.

Europe's biggest carmaker said on Thursday it would ask shareholders at the annual general meeting on April 22 to approve a possible bond issue with an option or right to convert the bond into 40 million preferred shares.

"Such an authorization would give us a further financing instrument which we consider to be standard for increasing the financial flexibility of major joint stock companies such as Volkswagen, but which is not available to us at the moment," finance chief Hans Dieter Poetsch said remarks prepared for VW's annual results news conference.

VW said the issue would be either bearer bonds with warrants or convertible bonds "with a maximum term of 20 years on one or several occasions in the period until April 21, 2015".

Management can only exercise the authorization if the sum total of new shares does not exceed the 135 million approved by shareholders at December's extraordinary general meeting.

Targeting Toyota

Volkswagen needs all of its 10.6 billion euro ($14.4 billion) cash pile and then some to fund a massive shopping spree which includes buying the Porsche AG sports car business and Europe's largest independent car dealership, Porsche Holding, for a total of 16 billion euros in equity and debt.

After wiring Porsche 3.9 billion last year to buy half of its sports car business, VW transferred some 1.7 billion euros in cash for a near 20 percent stake in Japanese small car specialist Suzuki Motor Corp. in January.

Volkswagen last year turned the tables on predator Porsche Automobil Holding SE, which had to sack its vaunted management team in July after its failed attempt to acquire VW pushed family-owned Porsche to the brink of collapse.

With Porsche now the 10th brand in VW's stable of high-powered motoring marques next to the likes of Bentley and Lamborghini, Volkswagen is focusing its efforts on overtaking Toyota Motor Corp. as the world's largest carmaker by 2018.

Volkswagen aims that year to sell more than 10 million vehicles and post a group pretax profit margin of more than 8 percent.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100311/ANE/303119972/1193#ixzz0hsp7bvDL

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