Porsche showed it has as much financial opportunism as the bankers who buy its sports cars yesterday when it drew down a €10bn (£7.6bn) credit line to put it in low-risk investments.
The credit line was originally granted to the German carmaker to fund a takeover approach for Volkswagen on terms that reflected a more favourable time in credit markets. Like a sharp-eyed arbitrageur, Porsche spotted that returns from low-risk investments were now higher than the costs of borrowing the money.
"The amount borrowed will be invested free of risk at favourable interest rates and will bring in additional profit for Porsche," it said.
The move could spell trouble for banks if other companies draw down on similar credit lines, some analysts say, because they already face significant constraints on their balance sheets and the availability of funds. Also, most credit lines have covenants that restrict their use.
One London-based analystsaid: "This has to be a worrying thing for the banks involved.
"If others are also doing this it will be adding an extra strain to banks' balance sheets, on top of which you'd have to ask, 'does Porsche know what it is doing with the investments it's going to make?'"
Porsche declined to comment on how it would invest the proceeds of the loan. Originally, €35bn in credit was provided by a consortium of ABN Amro, Barclays Capital, Merrill Lynch, UBS and Commerzbank to finance a complete takeover of Volkswagen but Porsche deliberately made a low-ball offer designed to fail. However, it kept open the €10bn credit line to help it finance lifting its stake in VW from 31 per cent to more than 50 per cent.
Porsche agreed to pay interest of 20 basis points, or 0.2 percentage points, more than the euro interbank offered rate for the loan, which matures on June 27, according to Bloomberg data.
The move is another example of Porsche's use of financial trades to hunt for profit, which led to it last year making more than three times as much money - €3.6bn - from trading share options as it did from building cars.
Porsche also made large amounts of money from currency hedging earlier this decade and some analysts have suggested that it is behaving more like a hedge fund than a carmaker.
Although Porsche denied its action had any bearing on its plans for VW, it will give it a war chest on top of its considerable cash reserves to buy further shares when it pleases.
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