Schaeffler unveiled a major refinancing plan through which it aims to chip away at its debt pile by selling some of its shares in Continental AG currently parked at banks.
The banks M.M.Warburg and Metzler - which have so far held Continental shares on Schaeffler's behalf - will sell up to 30 million shares in Continental in an accelerated bookbuild offering, the family-owned ball-bearings maker said in a statement on Sunday. "On the basis of the agreement Schaeffler will significantly reduce the financial debt of the holding company," it added. Following the share placement, the increased free float and improved liquidity in the stock will position Continental as a candidate for a re-entry into the DAX 30 index, the group said.
Interest rates and maturities of Schaeffler's remaining loans will also be improved significantly through the deal. In addition, Schaeffler said it plans to buy back a further 15.5 million Continental shares from the two banks, increasing its direct stake in the company to 49.9 percent from 42.2 percent. Its total stake including shares parked at the banks will then amount around 60 percent, down from 75 percent. All three parties have agreed not to reduce their respective participations in Continental further over the next 12 months.