Geely taps China banks to back $1.8 billion Volvo deal
Geely, the Chinese carmaker picked as the preferred bidder for Ford Motor’s Volvo unit, is seeking at least $1 billion in loans from Chinese banks to finance its $1.8 billion bid, sources said on Tuesday.
Home-grown Geely, which means “lucky” in Chinese, is hungry for modern and innovative technologies from the Swedish brand to upgrade its car lineup and tap the auto market in China, the world’s biggest.
At least three major Chinese banks including Bank of China, China Construction Bank and Export-Import Bank of China had agreed to extend loans to Zhejiang Geely Holding Group, said the banking sources briefed on the plan.
“Money is not a problem for Geely,” said a source. “They definitely have strong support from Chinese banks and there are a number of private equity funds queuing up to invest in Geely.”
The sources asked not to be identified as they were not authorized to speak to the media.
Export-Import Bank of China is a policy lender wholly owned by the Chinese government and directly led by the cabinet. Bank of China is China’s top foreign exchange lender. China Construction Bank is the country’s No.1 property lender.
Last month, Volvo’s union leaders held their first talks with Geely but were still waiting to see Geely’s financing plans for the loss-making Swedish carmaker.
A Geely spokesman in Beijing declined to comment on the loan plans but said Geely is still in negotiations with Ford to finalize details of the takeover. He declined to elaborate or comment on the timeframe for the deal, which analysts and industry sources expect to be finalized by early next year.
All the three Chinese banks involved said they would not comment on specific loans to clients.
Last week, Geely reached agreement with Ford on intellectual property rights (IPR) issues in its bid for Volvo, clearing a major barrier for the deal.
The remaining issues for Geely to negotiate with Ford, such as long-term strategy for Volvo’s sales and production, would be much easier to solve, said an industry source close to Geely.
Geely also needs to build relations with Volvo’s management, union leaders and the Swedish government, which are part of the negotiations.
ALL CHINA FUNDS?
Global carmakers such as Volkswagen and General Motors GM.UL are stepping up their presence in China, where Geely sells models such as the Free Cruiser and Geely Kingkong.
Helped by government subsidies, the Chinese car market overtook the United States as the world’s largest earlier this year. China has plenty of room to promote cars sales further in 2010, a senior Chinese government official said on Tuesday.
Filed under: money by TheDoor