VW to raise €4.4 billion in fresh capital

Europe's biggest car maker, Volkswagen, announced on Tuesday a long-awaited capital increase aimed at ensuring strong credit ratings as VW takes over the luxury sports car maker Porsche.

VW to raise €4.4 billion in fresh capital
Photo: DPA

VW said it would raise around €4.42 billion via the issuance of up to 65 million preferred shares, a decision expected to be approved by its supervisory board on Friday.

VW said it would also provide details on the final subscription price at that time.

Holders of VW’s preferred shares, those traded on the stock exchange, do not have voting rights.

“The net proceeds from the offering of the new shares are intended to be used for the purpose of enhancing Volkswagen’s capitalisation against the background of the planned creation of the integrated automotive group with Porsche,” a statement said.

The operation should “strengthen the financial stability and flexibility as well as to maintain the current credit ratings of Volkswagen,” it added.

The news caused VW stock to plunge in midday trading on the Frankfurt exchange.

The shares lost 6.72 percent to €68.05, because a capital increase dilutes the value of existing stock.

Frankfurt’s DAX index was 0.27 percent higher overall. Analyst Heino Ruland of Ruland Research was quoted by Dow Jones Newswires as saying that the operation lacked clarity, stressing that “the markets want to know the terms.”

“VW is probably gambling with the price,” Ruland said.

Last year, VW shareholders including the Gulf state of Qatar and the German state of Lower Saxony, approved a capital increase of up to €8.5 billion.

The subscription period for the one announced Tuesday is to run from March 31 to April 13.

The capital increase is designed to help finance VW’s takeover of Porsche without affecting the Wolfsburg-based auto giant’s bottom line and while maintaining strong credit ratings.

They are important so VW can continue to raise funds for its ongoing operations on capital markets at favourable conditions, even though the group had ample cash reserves of €10.6 billion at the end of December 2009.

Early this month, VW’s finance director said the group might just make one capital increase of around €4 billion, and that the money raised could also help finance other projects “in the medium term.”

VW bought almost 20 percent of the shares in the Japanese auto maker Suzuki late last year, and has expressed interest in creating a major heavy vehicle manufacturer with its Swedish brand Scania and the German industrial group MAN.

Early on Tuesday, Bernstein Research had already downgraded Volkswagen shares, citing concern that the market might be overlooking structural impediments to VW’s earnings power.

Berstein added that VW shares lacked earnings momentum and had limited long-run margin potential.

The firm estimated that VW was expensive once the Porsche transactions and capital raise was accounted for.

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Emergency numbers fail in several German states

Callers to the emergency numbers 110 and 112 weren’t able to reach operators Thursday morning in several German states.

The 112 emergency number on an ambulance.
The 112 emergency number on an ambulance. Photo: picture alliance/dpa | Boris Roessler

The emergency number 110 for police and 112 for fire crews failed around the country early Thursday morning, with callers unable to reach emergency operators for urgent assistance between about 4:30 am and 5:40 am local time.

The Office for Civil Protection and Disaster Aid is looking into these outages, which were reported in states including Lower Saxony, Baden-Württemberg, and  Brandenburg, and in major cities like Berlin, Cologne, Hamburg, and Frankfurt. Cologne was further affected by cuts to electricity, drinking water, and regular telephone services. Lower Saxony also saw disruptions to the internal phone networks of police and hospitals.

Emergency services are not reporting any more disturbances and people should be able to once again reach 110 and 112 around the country as normal.

Investigators are looking into the problem, but haven’t yet established a cause or any consequences that may have happened due to the outage. Provider Deutsche Telekom says they have ruled out the possibility of an attack by hackers.