Peugeot cap hike not on agenda as starts union talks

Wed May 29, 2013 8:11am EDT
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By Gilles Guillaume

PARIS (Reuters) - PSA Peugeot Citroen (PEUP.PA: Quote) denied a report it needs to raise cash from shareholders as the loss-making French carmaker began five months of talks with unions on Wednesday aimed at turning the business around.

News website La Tribune said Peugeot was considering a new capital hike after burning through 2.5 billion euros ($3.2 billion) of cash in the past year, a move it said would likely dilute the Peugeot family's stake.

"A capital increase is not on the agenda since the financial security of the group ... is at a high level and was reinforced in the first quarter by the success of bond issues," a spokesman for the carmaker said.

He pointed to the 7.3 billion euros in cash reserves and 3.2 billion in undrawn lines of credit the group had as of the end of last year.

"Our responsibility is to guarantee the group's future, whatever the market conditions," the spokesman added. "The priority today is to restore the group's profitability, the group is focused on putting the operational levers into action."

Shares in the company, down 3.3 percent in earlier trading, were 2.3 percent lower by 1205 GMT, slightly underperforming the market. The shares are up more than 30 percent since the start of the year after losing nearly half of their value in 2012.

La Tribune said discussions were underway at Peugeot and within the family, which owns 25 percent of the company and 38 percent of voting rights, citing an unnamed source close to the matter.

One trader was skeptical about talk of a capital hike, but said speculation could resurface that Peugeot might raise money by shedding stakes, such as in car parts supplier Faurecia (EPED.PA: Quote) and Zodiac Aerospace (ZODC.PA: Quote)   Continued...

The word Peugeot is displayed on an automobile at a car dealership in Bordeaux, Southwestern France, February 12, 2013. REUTERS/Regis Duvignau