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Update: Volkswagen scandal spreads trouble from IPOs to credit markets
[LONDON] A week after it admitted to cheating on US emissions tests for years, Volkswagen AG's pain is beginning to spread throughout Europe's credit markets.
The Bank of France stopped trading two securities backed by Volkswagen auto loans on Friday, while executives of parts supplier Schaeffler AG find themselves fielding questions about their biggest customer as they drum up support for an initial public offering, according to people familiar with the matters.
Since Volkswagen admitted Sept 18 that it had cheated on US air pollution tests since 2009, the chief executive officer resigned, the company became the target of a joint investigation by 27 US states and the stock price tumbled 28 percent.
Matthias Mueller, the former Porsche chief who was appointed Volkswagen's CEO Friday, said his most urgent task is to win back trust for the company. "Under my leadership, Volkswagen will do everything it can to develop and implement the most stringent compliance and governance standards in our industry," he said in a statement.
The two Volkswagen-related securities weren't in an updated list the Bank of France distributed on Friday after being included in the original version sent to investors earlier this week, said the people, who asked not to be identified because they aren't authorized to discuss the matter publicly.
The Paris-based bank is buying asset-backed securities under a European Central Bank purchase program designed to help boost lending in the euro area. A Bank of France official declined to comment on the purchase-offer list.
Volkswagen Financial Services has 22.8 billion euros (S$36.4 billion) of outstanding asset-backed debt, according to a September presentation on its website. Marc Siedler, a spokesman for the finance unit, declined to comment in an e-mailed statement.
Herzogenaurach, Germany-based Schaeffler announced IPO plans on Monday, three days after the scandal broke. Concerns about the impact of the scandal, as well as Chinese and global market volatility, could affect investor views on the IPO valuation, according to the two people.
A representative for Schaeffler declined to comment.
The company is planning to set a price range for the offering as soon as Monday as it crisscrosses Europe to market the shares to investors from London to Zurich, the people said.
Schaeffler is telling investors that its products aren't involved in the scandal and any decline in Volkswagen car production will have an insignificant impact on sales, according to two of the people. The automotive supplier is also saying that it'll benefit from a possible shift to hybrid and more efficient gas vehicles because its products help meet higher technology demands, they said.
An IPO could raise as much as three billion euros, people familiar said on Monday.
Schaeffler, which competes with SKF AB of Sweden and Timken Co in the US, plans to list a stake of about 25 per cent in Frankfurt by selling as many as 166 million new and existing shares, it said in a statement on Sept 21. Initial trading is targeted for Oct 5, it said in a separate presentation.