VW Gains as Porsche Refinancing Boosts Expectations

VW Gains as Porsche Refinancing Boosts Expectations

March 26 (Bloomberg) -- Volkswagen AG rose 7.6 percent in German trading after part-owner Porsche SE refinanced a 10 billion-euro ($14 billion) loan, spurring speculation that the sports-car maker will increase its stake.

VW gained 18.04 euros to 255 euros after rising 11 percent yesterday when Porsche disclosed the new credit line. Porsche rose 1.07 euros, or 2.8 percent, to 39.33 euros today.

“What’s fanning prices is increased speculation that Porsche will now further buy into Volkswagen,” said Bjoern Voss, an auto-industry analyst with M.M. Warburg in Hamburg. “The higher VW’s price, the more Porsche can use its cash- settled options to generate cash.”

Porsche said yesterday it had reached agreement with 15 banks, including new lenders, to help refinance a loan coming due this month. The Stuttgart-based company owned 50.8 percent of Volkswagen as of Jan. 5 and has said it plans to lift the stake to 75 percent before the end of this year, a level that would allow it to bring VW’s cash onto its books.

Voss recommends buying Porsche shares and preferred stock of VW. He has a “sell” rating on the company’s core shares.

The credit crunch and recession meant banks took longer to agree the new loan, which will come in two tranches spanning 12 months, with 6.7 billion euros extendable for a further year, Porsche said. The maker of the 911 sports car, which has yet to finalize terms for an extra 2.5 billion euros to boost working capital, yesterday rose 0.2 percent.

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