(Adds details of structure and background)
By Alasdair Reilly and Tessa Walsh
LONDON Jan 9 Banque PSA, the
financial arm of PSA Peugeot Citroen, is set to sign
around 5 billion euros ($6.5 billion) of loans as part of an
18.5 billion euro debt rescue plan, bankers said on Wednesday.
The debt rescue package consists of an 11.5 billion euro
loan refinancing, which includes the 5 billion euro loan and
bilateral loans, and around 7 billion euros of state loan
guarantees, bankers said.
Slumping sales at Peugeot, Europe's second-biggest auto
maker, have put the group's finances under strain, forcing it to
shed assets, cut 10,000 jobs and close production capacity.
Banque PSA is putting the 11.5 billion euro refinancing
package in place to secure funding before a possible downgrade
of its credit rating to non-investment grade or "junk". A
downgrade would increase the bank's funding cost.
The 5 billion euro loan refinancing is being arranged by
French banks including BNP Paribas, Credit Agricole, Natixis and
Societe Generale. French banks are also providing the bilateral
The French government's 7 billion euros of state loan
guarantees were submitted to the European Union for approval on
Wednesday after they were deemed restructuring aid.
Banque PSA's 5 billion euro loan financing closed
successfully after raising a healthy oversubscription, a banker
close to the deal said, and is expected to sign at the end of
this week or the beginning of next.
"This is a positive result in the circumstances, the EU
challenge to state aid is outstanding, but banks still came in
and supported the client," one of the bankers said. "There is a
lot of press coverage of Peugeot, the deal was a lot of money in
a challenging sector, but it got done well."
The financing includes a 3.6 billion euro new money term
loan, which raised 4.1 billion euros in syndication, and a
"forward start" of around 1.1 billion euros that will extend the
maturity on existing loans when they expire.
Some existing lenders declined to join various parts of the
5 billion euro refinancing due to over-exposure to the auto
sector and banks' withdrawal from non-core relationship lending.
To counter the dominance of French banks in the loan, a
"super majority" concept was introduced for any decisions that
need to be made on the loan which makes it difficult for one
group of banks to control the financing.
The interest margin on the financing is based on ratings and
pays a margin of around 370 basis points (bps) over EURIBOR for
a rating of Ba1/BB+ if Banque PSA is downgraded from its current
BBB-/Baa3 level, one banker said previously.
Peugeot said in October 2012 Banque PSA had obtained banking
support for new terms and conditions on the 11.5 billion euro
loan facilities, which included 1 billion of new liquidity.
The credit facilities will be available for drawing between
2013 and 2015.
($1 = 0.7667 euros)
(Editing by Keiron Henderson and David Holmes)