Porsche set to pay debt with rights issue

City A.M. Reporter
PORSCHE is driving ahead with a €5bn (£4.4bn) rights issue in an attempt to keep hopes of a merger with car maker Volkswagen (VW) alive by paying off a chunk of its heavy debts.

Investors took the planned capital hike in their stride and shares in the sports car maker fell by just 5.5 per cent €59.27.

Porsche is offering holders of ordinary and preference shares the chance to buy three shares for every four they own at €38 per share. At Friday’s closing share price of €56.22, this represents a discount of 32.4 per cent.

The German company is having to turn to shareholders after it ran up crippling debts of more than €10bn in a botched attempt to buy VW. It raised its interest to just over 50 per cent of VW’s voting stock in early 2009, but nearly bankrupted itself in the process.

Porsche was eventually forced to seek a merger with its larger rival, but this deal has since been put in doubt by both financial and legal hurdles.

Half of the amount raised will come from the Porsche and Piech clans, along with shareholder Qatar, which control Porsche. The families have committed to buying the rights on Porsche’s ordinary shares.

The cash will be used to redeem bank loans and pay down debt, a core requirement for VW shareholders before they agree to folding Porsche into their own cash-rich company. Porsche’s net debt totalled €6.34bn at the end of 2010.



ADAM Young is joint global head of Rothschild’s equity capital markets (ECM) division running teams in London, New York and Hong Kong.

He has worked in ECM for 26 years, and is currently leading the team at Rothschild as Porsche’s financial adviser on the share sale between Porsche and Volkswagen.

Young started his career at Schroders; he then acted as co-chief executive of joint venture ABN AMRO Rothschild until 2007, before establishing the ECM advisory business at Rothschild in 2008.

Since 2009 Young and his team have advised on 95 equity and equity-linked offerings worth $250bn (£156bn).

Recent transactions which he led include the sale by Vodafone of a $6.7bn stake in China Mobile Telecom, the $70bn capital increase by Petrobras and $250m placing and open offer by Kenmare Resources.

By Phoebe Torrance