Schaeffler Group Seeks Investor to Help Pay Debt

Schaeffler Group Seeks Investor to Help Pay Debt

Feb. 8 (Bloomberg) -- Schaeffler Group, the auto-parts maker saddled with 11 billion euros ($14 billion) of debt from buying Continental AG, said it’s seeking an investor and repeated a request for German government aid.

“The Schaeffler family is willing to sell” parts of the Herzogenaurach-based company to reduce debt, Maria-Elisabeth Schaeffler and her son Georg Schaeffler said in an e-mailed statement today. “Despite a very active” search, the company has yet to get the investment it needs and is seeking “temporary” state assistance, they said.

Schaeffler Group, which makes transmission parts and ball bearings for cars, planes and fishing reels, bought 90 percent of Hanover, Germany-based Continental in November. It plans to combine the automotive-parts businesses of the two companies to cut costs. Schaeffler and Continental have a combined 22 billion euros of debt as a global recession plunges the auto industry into its worst crisis in more than a decade.

“Without state aid, neither Schaeffler nor Conti are going to make it,” said Ferdinand Dudenhoeffer, managing director at B&D Forecast and a director of the Center for Automotive Research at the University of Duisburg-Essen. “They won’t find an outside investor in the current climate. There are no rich Russians around and the private equity guys have their own troubles.”

Schaeffler Group was unsuccessful in obtaining government help after meeting the Economy Ministry and representatives of three German states for talks on Jan. 28.

Government Talks

Chancellor Angela Merkel ruled out government support, Bild reported Feb. 2. Schaeffler needs 3 billion to 5 billion euros of fresh capital, the newspaper reported, without saying where it got the information. The German government commissioned PricewaterhouseCoopers LLP to compile an analysis of the company.

Detlef Sieverdingbeck, a spokesman for Schaeffler Group, declined to comment on how much the company is seeking to raise and how big a stake is for sale. “No reasonable option will be excluded,” he said.

“We are not gamblers who have speculated and lost,” the Schaefflers said. “We are not simply looking for handouts. Our talks with politicians are about securing interim financial aid in a special exceptional situation for a company that is sound at the core.”

‘Viable Concept’

The family said they expect to find investors “at the latest when the economic situation has recovered.” In the meantime, they’re preparing a “viable concept” to present to German lawmakers in the coming weeks, Sieverdingbeck said.

The Schaefflers “planned for an economic slowdown in mid- 2008,” they said. “But we could not have predicted the fastest and most dramatic collapse of the global economy in 80 years.”

Continental’s credit rating was lowered two levels to BB, the second-highest non-investment grade, from BBB- on Jan. 27 by Standard & Poor’s, which cited risks related to its parent. The rating has a negative outlook, indicating S&P may reduce it again.

Shares of Continental closed at 14.48 euros in Frankfurt on Feb. 6, 77 percent lower than a year earlier.

BLOOMBERG