Lower debt servicing costs mean more money to spend on new products and concepts, like the Mercedes-Benz Biome.
Daimler AG has signed an agreement with a consortium of international banks on a syndicated $10.6 billion credit line with a term of five years, a move that the maker believes could shore up its finances and slash its costs..
Bodo Uebber, Member of Daimler’s Board of Management for Finance and Controlling, said Daimler doesn’t expect to draw on the credit line but will use it to replace existing lines of credit put in place when terms were less favorable.
“The credit line offers very good conditions and was significantly oversubscribed,” Uebber said, after signing the agreement. He added, “The high demand for this credit line and its attractive conditions show that Daimler enjoys a very good reputation in the banking world and has excellent relations with a large number of banks.”
The move is the latest in an industry desperate to shore up its collective finances in the wake of last year’s global economic meltdown. General Motors last week announced moves to slash debt by $11 billion, and Ford CEO Alan Mulally announced several steps will be taken to reduce that maker’s hefty debt load, as well.
In many cases, makers aren’t necessarily trying to reduce debt but simply get access to the cash they need on better terms than what they could get over the last several years.
“With this credit line, we have secured today’s favorable conditions for the next five years and have gained a solid liquidity buffer for the long term,” Daimler’s Uebber said.
The consortium is comprised of more than 30 European, American and Asian banks. The banks’ positive response led to substantial oversubscription and thus allowed a significant reduction of the original credit commitment.
Uebber said Daimler will use the credit line solely as a liquidity reserve.
With the agreement on the new credit line now in place, Daimler will terminate its two existing syndicated credit lines of US $5 billion and euro 3 billion before the ends of their terms, Uebber said.
Last week, Daimler said it expects total unit sales and Group revenue to increase significantly for the full-year 2010. In view of the good business developments in all divisions, the Daimler Group is targeting EBIT from its ongoing businesses of more than $9.8 billion for the full year.
Surging sales in China have paced the company’s recovery, Daimler executives said.