German auto parts maker Schaeffler gets lifeline
Ailing German auto parts maker Schaeffler, which is struggling to acquire its much bigger rival Continental, said Tuesday that it had reached a major mid-term financing deal with its creditors.
The around 12-billion-euro (17-billion-dollar) agreement with the five banks in Schaeffler's lending consortium gives the group a much-needed lifeline.
"With this agreement on a financing concept, we have reached a key milestone on the way to developing the Schaeffler Group in the coming years," chief financial officer Klaus Rosenfeld said in a statement.
"At the same time, we are fulfilling a further important requirement with this concept for a possible merger of the Schaeffler Group with Continental AG."
The financing will come in two tranches -- one covering a period of up to four and a half years, the other of up to six years.
The deal sent Continental shares soaring 10 percent in late-morning trade to 24.48 euros on the midcap MDax index, which was otherwise flat in Tuesday's session.
Schaeffler agreed to take over Continental last year but now finds itself crushed under heavy debt contracted to carry out the deal.
It announced in March it would put 20,000 employees on short-time work.
The two companies have tried to defuse tensions over the merger of late. Continental has agreed to jettison its CEO, Karl-Thomas Neumann, in favour of a Schaeffler executive Elmar Degenhart.