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UPDATE 2-Peugeot prepares finances for GEFCO suitors-sources
July 25, 2012 / 4:21 PM / 5 years ago

UPDATE 2-Peugeot prepares finances for GEFCO suitors-sources

* Peugeot adviser working on 1 bln eur finances-sources

* Gores Group, Platinum and PAI vying for GEFCO-sources

* CVC/AXA Private Equity also eye logistics group-sources (Adds detail on financing, price)

By Simon Meads and Sophie Sassard

LONDON, July 25 (Reuters) - Loss-making Peugeot is working on a financing package to help push through the sale of logistics division GEFCO, people familiar with the process said, as the French auto group fights to keep the critical disposal on track.

Europe’s second-largest car maker has been pushing ahead with an unpopular plant closure and thousands of job cuts to try and contain ballooning losses that threaten its future.

A disposal of a large majority stake in GEFCO - which ships Peugeot and Citroen cars around the world - could bring in up to 1 billion euros ($1.2 billion) and is a crucial step to cutting debt and shoring up the car maker’s finances.

“Failing to sell GEFCO would deprive Peugeot of a substantial amount of cash at a time when they need it”, said one of the people.

GEFCO is one of only a few profitable and saleable assets that Peugeot has at its disposal.

The group has narrowed the field of potential buyers to four private equity bidders - Gores Group, Platinum Equity, PAI and a team of CVC and AXA Private Equity - four people familiar with the situation said.

Peugeot’s adviser on the GEFCO sale, Credit Suisse , is working on a financial package of up to 1 billion euros of loans and a high-yield bond that would be graded by a ratings agency, those people said.

The package would provide a guaranteed debt pool to finance a leveraged buy-out, while the rating would provide more reassurance for lenders to these private equity bidders and for investors in a high yield bond issued by GEFCO.

GEFCO is Peugeot’s most profitable unit, registering a 13 percent rise in operating profits in 2011.

Still, any buyer will face significant issues, not least of all the prospect of having to make widespread job cuts to GEFCO’s 10,300 staff worldwide to make it more competitive.

That could draw often secretive private equity groups into the firing line of French President Francois Hollande.

“[Job cutting] is a political hot potato. It takes a very long time to get anything done in France, and it is very costly to restructure and take people out,” said a banker who advises on automotive industry deals.

Problems at the parent company could delay the sale and make the business less attractive, while private equity suitors are also concerned about GEFCO’s reliance on the business of delivering Peugeot’s cars globally, the people said.

All those issues mean that bids for GEFCO may not reach the 1 billion price target, despite it expecting some 1 billion euros in extra annual revenues from 2013 thanks to a strategic tie-up with General Motors.

Final bids are due the first week of September, when French workers return from their annual August leave. The private equity groups, Credit Suisse and Peugeot declined to comment.

For a full story on Peugeot losses click on (Editing by Douwe Miedema and Elaine Hardcastle)

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