Banks loan carmaker Daimler €11bn to develop electric and self driving cars
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Mercedes parent Daimler has obtained an €11bn credit line with a group of international banks, ensuring it has access to vast funding as its ramps up efforts for electric and self-driving cars.
Daimler said the credit line transaction, which has a five-year term with two extension options, was “concluded on significantly improved terms and was significantly oversubscribed.”
Finance chief Bodo Uebber said the terms showed that “Daimler enjoys a high reputation in the banking world and that the banks trust our strategy and the further development of the company.”
By contrast, price-to-earnings ratios in the stock market are at historic lows, indicating equity investors are nervous about carmakers’ abilities to keep producing hefty profits in the coming years, which could see car sales peak just as greater R&D efforts are needed for new technologies.
Last week Evercore ISI noted Daimler’s multiple was less than six times earnings, the sort of suppressed valuation car stocks see during recessions. “Worries concerning global trade are the final nail in the coffin that was already firmly sealed by cycle fears, disruption and regulation,” the analysts wrote.
A chart of Daimler shares going back five years might suggest the luxury group is struggling to sell cars. In fact, they have reported record results the past seven years. However, in June, sales were down 2.6 per cent from a year ago — the first year-to-year decline in 64 months.
Daimler said the €11bn credit line, obtained from a group of more than 40 banks in three continents, will “ensure sufficient financial flexibility at all times.”
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