Volkswagen extends 21 billion euro credit loan due to cheating scandal

According to Reuters, Volkswagen Group said on November 28 local time that it would extend the term of its 20 billion euro (about 21.2 billion US dollars) loan to maintain its financial strength and make up for the losses caused by the diesel cheating scandal.

Volkswagen Group's market value has fallen by billions of euros since its biggest scandal in history was exposed. In December last year, Volkswagen Group reached a transitional loan agreement with several banks for a total of 20 billion euros (21.22 billion U.S. dollars) and a period of one year to help Volkswagen cope with the costs brought by the exhaust emissions scandal. On November 28 this year, Volkswagen said in an email to Reuters that "we have decided to extend the loan period to July 2017." It also pointed out that the credit line will stabilize the Volkswagen Group's financial framework and increase its financial flexibility. Volkswagen said it would return to the unsecured debt market in due course, but would still use asset-backed bonds and commercial paper.

In April this year, people familiar with the matter told Reuters that Volkswagen hoped to return to the bond market in May to replace expensive bank loans. At that time, Volkswagen Group made the decision to extend the loan period. However, Volkswagen still hopes to return to the bond market as soon as possible. And once the solution for the 3.0-liter diesel car is passed, Volkswagen will be able to mark out the scandal debt in the bond prospectus.

A person familiar with the matter said, "In theory, Volkswagen can issue bonds in December, but they will wait for the best market window." Another person familiar with the matter revealed that Volkswagen is likely to continue borrowing in the bond market by issuing billions of euros of bonds next year.

Since the cheating scandal, Volkswagen's credit rating has been severely affected. The world's leading financial analysis agency Standard & Poor's (S&P) downgraded Volkswagen's credit rating from A to BBB+, while Daimler and BMW's credit ratings are A and A+ respectively.

In 2015, Volkswagen was exposed for cheating in the U.S. diesel vehicle emissions test, and Volkswagen had to conduct large-scale negotiations with the government and users. Last month, a U.S. judge approved the agreement between Volkswagen, the government and car owners, and Volkswagen agreed to pay $14.7 billion in compensation for 475,000 2.0-liter diesel vehicles that caused pollution. In addition, Volkswagen Group will discuss the buyback and repair of 80,000 3.0-liter vehicles on Wednesday.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.