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UPDATE 1-Volvo Cars gets China Development Bank loan
December 13, 2012 / 5:01 PM / 5 years ago

UPDATE 1-Volvo Cars gets China Development Bank loan

* 922 mln euro loan to refinance existing loans

* Aims for further loans under the deal to finance investments

* Pays back EIB loan ahead of time (Adds company comment, background)

By Anna Ringstrom

STOCKHOLM, Dec 13 (Reuters) - Chinese-owned car maker Volvo Car Corporation has agreed a loan from China Development Bank to repay existing debt and hopes for more to help finance the investment it needs to double vehicle sales.

Volvo, which has scaled back production at its main plants in response to weakening demand in Europe, said on Thursday it had signed a 922 million euro ($1.2 billion) loan.

Spokesman Per-Ake Froberg said that, as a second step under the loan agreement, the firm hoped to secure credits to be used to help finance investments amounting to $11 billion, half of which will be spent on a production upgrade in Sweden.

Volvo has said it will invest $11 billion as it aims to double total sales by 2020 to 800,000 vehicles.

“We are developing an entirely new vehicle architecture that will be very important and that will of course need to be financed,” he said.

The maker of premium cars, which Zhejiang Geely Holding Group bought from Ford Motor Co in 2010, says the investment will cut costs and help sales of its cars buck the market downturn.

Recently appointed Chief Executive Hakan Samuelsson said last week he saw no positive signals in the European market while North America was “coming back” and that China was still growing, albeit at a slower pace.

The first loan matures in 2020, the company said.

Sweden’s debt office said separately that Volvo Cars had paid back a loan from the European Investment Bank ahead of time following the agreement with China Development Bank.

$1 = 0.7669 euros Reporting by Stockholm newsroom; Editing by Erica Billingham

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