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Business

VW's Debt Seen Doubling After Deal Fails

Morgan Stanley has estimated that German carmaker Volkswagen's net debt may double after Abu Dhabi backed out of an agreement to allow Volkswagen to pay in shares for their joint purchase of LeasePlan Corp., according to Bloomberg News. Volkswagen, Europe's largest carmaker, will pay for the deal in cash and may end the year with over €4 billion ($4.86 billion) of net debt compared with about €2 billion now, Morgan Stanley analyst Adam Jonas told Bloomberg. Net income will decline to €789 million this year from €1.37 billion last year, he added. Volkswagen on Wednesday said Abu Dhabi abandoned the plan to buy about 10 percent of the automaker's shares held in treasury to pay for Volkswagen's half of the €2 billion purchase of LeasePlan. The financing collapsed after Volkswagen's shares shed more than a quarter of their value this year. "The news from yesterday was definitely negative," Gerhard Monsberger, who helps manage €30 billion, including Volkswagen shares, at Hansainvest in Hamburg, told Bloomberg. "We don't expect the company to do anything like cut the dividend though.

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