Release time : 2015-06-13 08:25:25
German ball bearings manufacturer Schaeffler has hired JP Morgan to advise on a strategic review after the company gained an unexpected majority in target Continental AG, bankers close to the deal said on Thursday.
The strategic review will precede any changes to Schaeffler's 16.1 billion euro syndicated loan, which are not expected before 2009.
"Nothing on the loan is moving until 2009," a senior banker close to the deal said.
Schaeffler gained an unexpected 90.19 percent majority stake in Continental in September when share prices collapsed as the credit crunch intensified, instead of a targeted 49.99 percent minority share.
The 16.1 billion loan was launched in July, but the six arranging banks Bayerische Hypo-und Vereinsbank, Commerzbank, Dresdner Kleinwort, Landesbank Baden-Wurttemberg, Royal Bank of Scotland and UBS -- put syndication on hold in early October after the deal failed to attract support.
JP Morgan is now helping Schaeffler to assess opportunities arising from its majority stake in Continental and when that process is complete, the loan will be adjusted.
"Schaeffler's high share take-up provided them with more strategic opportunities than they had before which they are now reviewing. Then we'll see what's appropriate in terms of financing," the senior banker said.
JP Morgan declined to comment.
Any adjustments to the loan however are unlikely to revive dwindling bank appetite in the New Year for making large loan commitments, particularly to the troubled auto sector where demand is slumping, several bankers said.
Schaeffler said that it plans to sell its excess shares back to banks, which have been mandated to pass the shares on. This will avoid avoid triggering a change of control provision on a 13.5 billion euro loan that Continental took out to finance its acquisition of VDO.
Schaeffler's 16.1 billion euro loan is currently undrawn and will not be drawn to pay for the acquisition until it receives EU approval.
If the loan is drawn, the six banks may be forced to provide the funds as a bridge loan, possibly to asset sales, before relaunching the deal with revised terms and conditions, several sources said.
"This is about giving Schaeffler time to do the strategic review as they have a greater stake than anticipated," the senior banker said.