* Covestro cuts targeted proceeds to 1.5 bln euros
* Covestro IPO price range slashed to 21.50-24.50 euros/shr
* Schaeffler considers downsizing IPO volume - sources
* Schaeffler IPO delayed by at least days - sources
By Ludwig Burger and Arno Schuetze
FRANKFURT, Oct 1 (Reuters) - Germany’s two biggest IPO candidates have been forced to reconsider the size of their listing plans as Volkswagen’s emissions scandal has scared off investors and equity markets continue to wobble.
Bayer’s plastics business unit Covestro cut the size of its planned share sale on Thursday to 1.5 billion euros ($1.7 bln), from 2.5 bln, and postponed the market debut from Friday to Tuesday.
Ball bearings maker Schaeffler is also considering scaling down its initial public offering, sources familiar with the issue said, and delayed the issue from Monday by at least a few days.
The car industry is a major customer for both Schaeffler and Covestro and has been thrown into turmoil by the crisis engulfing Volkswagen. Concerns over a slowdown in China have also reduced appetite for the shares.
“The markets are really difficult right now, especially for car makers and their suppliers,” a capital markets banker said. The volatility index for Germany’s benchmark DAX index is now about 10 notches above what is considered an attractive environment, the banker said.
Highlighting market jitters, another German company, digital classified ads firm Scout24, got off to a disappointing start on the Frankfurt exchange on Thursday, with its shares falling below their IPO price.
Covestro and Schaeffler had initially aimed to raise about 2.5 billion euros each, tying for the largest IPO in Germany in almost 15 years.
Covestro has now reduced the number of shares on sale and cut the price range for its IPO to between 21.50 and 24.50 euros, down from 26.50-35.50 euros previously, it said in a statement on Thursday.
It plans to use the proceeds to clear debt it took on from parent Bayer. To make up for the shortfall, Bayer will give Covestro an additional 1 billion euros in equity capital.
Under the new terms, Bayer will own 66.7-69.6 percent of the subsidiary, up from 60-66 percent previously targeted. The number of new shares to be issued will depend on the issue price in order to meet the targeted gross proceeds.
Bayer wants to spin off Covestro completely in the medium term.
Schaeffler is also considering selling fewer shares but is unlikely to lower the offer price, the sources familiar with the deal said.
“Schaeffler will not sell its shares on the cheap and if they are unable to reap the valuation they want, they will postpone the IPO by a couple of months,” one of the sources said.
If the company feels confident it can go ahead with the IPO, a price range could be announced as early as Friday or the beginning of next week, the sources said. They added that the debut will be delayed by at least a couple of days and will not take place next Monday, as initially planned.
Schaeffler is currently assessing investor feedback from various management presentations and no final decision has been taken yet, the sources said.
Covestro’s first day of trading was postponed to Oct. 6 from Oct. 2 to allow for Germany’s financial regulator to review the changed terms.
Having struggled to fill its order book over the two-week subscription period, Covestro finally filled it on Thursday under the new terms, two people familiar with the matter said.
Bayer and Schaeffler declined to comment. ($1 = 0.8973 euros) (Additional reporting by Kathrin Jones; Editing by Keith Weir and Susan Fenton)