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French carmakers want to pay back state loans quickly

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French carmakers want to pay back state loans quickly

Automotive News Europe -- September 20, 2010 06:01 CET

PARIS (Reuters) -- PSA/Peugeot-Citroen SA and Renault SA want to finish paying back the 3 billion euro ($3.93 billion) loans the French state granted each of them to help them through the crisis as soon as possible.

The two French carmakers last week paid back 1 billion euros each in advance -- they had originally been due to start paying back the loans, which were granted at 6 percent interest, starting in 2011.

"Today, we can borrow at under 5 percent, and remember, the loan is indexed against profits, but inversely," Renault Chief Operating Officer Patrick Pelata said.

"Normally, when risk decreases, the interest rated decreases, but in this case as risk decreases, the interest rate increases," Pelata said Thursday on the sidelines of an event marking 100 years of Renault's presence on the Champs Elysees in Paris.

"With Renault in a rather better situation, it makes sense for us to pay back (the loan) relatively quickly because if we don't we are going to pay a higher rate of interest."

A Renault spokeswoman said the balance of 2 billion euros could be repaid starting in April 2011, the date from which repayments were due to begin, three years after the loans were granted.

A PSA spokesman also confirmed the group was free to repay the loan starting in April 2011, noting that the payback process would probably be quick.

The two groups can pay back part or all of the outstanding loans, but in the case of a partial repayment, the first installment would have to be at least 500 million euros.

The loan is indexed to the two groups' operating performance, and the interest rate could rise as high as 9 percent.

After heavy losses in 2009, the two companies posted profits in the first half of 2010.

For 2010, PSA is targeting a full-year recurring operating income of about 1.5 billion euros.

Renault wants to achieve a positive free cash flow in 2010.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100920/ANE/309179970/1317#ixzz106HHAHvN

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