VW supports Qatar loan to Porsche

Volkswagen would support the Gulf emirate of Qatar taking a substantial voting stake in either its debt-laden parent Porsche or in VW itself, Europe’s largest carmaker has said.

“In principle we view this positively since it would accelerate the process to form an integrated group with 10 brands,” a VW spokesman said, using phrasing approved by both companies.

VW ordinary shares rallied on Monday on speculation that Qatar will strike a deal with Porsche by mid-June that will help the sports car maker to pay down its 9 billion euro (US$12.8 billion) debt.

Porsche CEO Wendelin Wiedeking has already travelled to Qatar several times and has worked out two possible options for an agreement with the emirate, Germany’s Focus magazine said in an article published on Monday, without citing sources.

Qatar’s prime minister said on May 30 that Qatar was considering taking a stake in Porsche or other German automotive companies.

One option is for Qatar to buy up Porsche’s options for 24 per cent of shares of Volkswagen via its fund Qatar Investment Authority (QIA), flushing cash into Porsche’s coffers and giving Volkswagen a new major shareholder.

Another, more complicated, option would be for Qatar to buy a direct stake in Porsche Automobil Holding SE, which controls the company’s sports car business as well as its 51 per cent stake in Volkswagen.

In March, Porsche tried to put together 12.5 billion euros in fresh credit. It needed 10 billion euros to refinance loans and sought an additional 2.5 billion euros.

So far it has only managed to secure 10.75 billion and has now asked the German government for a 1.75 billion euros loan via state bank KfW.

VW and Porsche are considering merging after Porsche dropped attempts to take full control of VW.

VW’s chairman, Ferdinand Piech, is locked in a struggle for control with his cousin Wolfgang Porsche, who chairs the holding company that owns Porsche’s sports car business and 51 per cent of VW’s ordinary shares.

Analysts at merchant bank Sal Oppenheim estimate Porsche could face a cash loss of about 3.5 billion euros should Qatar buy VW ordinaries at an average price of 80 euros per share, roughly 50 euros below its estimate for the strike price of the put options that Porsche wrote.

The bank said it believes Porsche’s share price already reflects the assumption that it would find a buyer for 25 per cent of VW and that Porsche will get out of the deal relatively unharmed.