Porsche to start $7b share sale to cut debt burden

Porsche SE, the sports-car maker that plans to merge with Volkswagen AG, will start 5 billion euros ($7 billion) share sale March 30 to reduce debt.

The carmaker’s supervisory and executive boards signed off on the plan to sell shares at 38 euros apiece to current owners, Stuttgart, Germany-based Porsche said in a statement late Sunday. One existing share carries the right to subscribe to 0.75 new shares. The price is a 32 percent discount to the preferred stock’s close on March 25 of 56.22 euros.

Porsche, which plans to use the proceeds to cut debt to about 1.5 billion euros, last week said a timetable to sell the shares still stands amid the volatile financial markets following the Japanese earthquake. Porsche and Volkswagen agreed to combine in August 2009 after the maker of the 911 sports car racked up more than 10 billion euros of debt in an unsuccessful attempt to gain control of VW.

“It’s not the perfect timing given how volatile the market has been in recent weeks, but they’re under pressure to get this done,” said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler who recommends buying the shares. “They’re averting the much greater damage that would occur if the merger were pushed back for months.” 

(Bloomberg)