European carmakers take share of funds

Among the 800 institutions that tapped the second round of three-year funding from the European Central Bank were some of the region’s biggest carmakers.

Germany’s Mercedes-Benz, Daimler’s car unit, and Volkswagen confirmed on Thursday that they had accessed the second phase of the ECB’s three-year, longer-term refinancing operations for undisclosed amounts. While the aim of the LTRO was to ease funding constraints evident in the European banking system at the end of last year, a number of carmakers – as well as industrial companies – are eligible because

Carmakers frequently tap the public bond markets for financing as they rely on large amounts of liquidity to fund their manufacturing and lending operations. European carmakers are not thought to have borrowed money from the ECB in the first round of three-year funding. However, since December there has been a widening of the pool of assets considered eligible to borrow from the ECB under the programme.

“I fully expected some of the carmakers to tap the second LTRO. After the collateral pool was widened, consumer loans are likely to have dropped in,” said Suki Mann, head of credit strategy at Société Générale in London.

Volkswagen Bank said it had used the ECB tender to “an appropriate extent” as part of its “diversified refinancing strategy”. However, it declined to reveal the sum involved.

Mercedes-Benz Bank said it also took part “because it allowed us to better support our operational business and continue to provide our customers with good conditions for vehicle financing. The volume represented for us an absolutely normal refinancing sum”.

Source: FT


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