Volvo Cars plans to raise 500 million euros in first bond issue

STOCKHOLM, May 6 (Reuters) - Volvo Car Group aims to raise 500 million euros ($571 million) by issuing the first corporate bond in its 89 year history, the Chinese-owned carmaker said on Friday.

The Sweden-based company, bought by China’s Zhejiang Geely Holding Group Co. from Ford Motor Co. in 2010, said it would begin a roadshow for potential investors on May 9.

“The proceeds from the bond issue are being raised for general corporate purposes and are aimed at increasing the company’s financial flexibility and diversifying its funding sources,” Volvo Car Group said in a press release.

The company swung to a profit in the first quarter, helped by new upmarket models seen as key in its quest to carve out a niche in the premium car market.

Operating earnings rose to 3.1 billion Swedish crowns ($382 million), compared with a loss of 11 million in the same quarter last year.

Volvo Car Group, a small player compared with the likes of Daimler’s Mercedes-Benz and BMW, has said it must boost profitability to the level of rival premium carmakers in the coming years, viewing an operating margin of around 8 percent as a benchmark.

The company, one of Sweden’s biggest by sales and staff numbers, is banking on a 75 billion crown investment plan in new models and plants to secure a firm foothold in a premium market where it had struggled to make inroads under Ford.

($1 = 8.1271 Swedish crowns)

$1 = 0.8757 euros Reporting by Johan Sennero; Editing by Mark Potter