(Bloomberg) -- A Volkswagen AG entity is set to raise new debt on Tuesday in a deal that tested demand among bond investors during a tough time for European carmakers.
Volkswagen Financial Services — the German firm’s in-house customer financing businesses — is poised to raise €2.75 billion ($2.92 billion) via three green bonds, according to a person familiar with the matter who asked not to be identified. The tranches are due between 2.5 and seven years and orders amounted to more than €11.7 billion at final terms.
The deal “proves that we are able to tap the market even in a challenging market environment,” Carsten Krebs, head of corporate communications, said in an email.
The automotive sector has dragged down the performance of the global credit market in recent months on the back of multiple company profit warnings and concerns that European heavyweights will be left behind in the electric vehicle transition. Worries that the US will hike tariffs on imported cars after Donald Trump returns to the White House have also hit the sector recently.
VW entities’ bonds have been the worst price performer among issuers with large borrowings on the euro investment-grade index since the end of the summer, based on data compiled by Bloomberg.
Today’s offering falls under Volkswagen’s green finance framework, with the use of proceeds intended to be used for eligible green projects relating to vehicles with zero-tailpipe emissions.
(Updates with final terms in second paragraph, company comment in third.)
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