M&A Borrowing for the Volvo Deal

2009-12-01

Geely, the Chinese carmaker tagged 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.

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."

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. (China Daily)

Not so exciting, in and of itself. Most folks have found the other recent news on this deal (that Geely would not be getting Volvo technology) a lot more interesting.

However, this caught my eye because of what was not in the article. No mention was made about whether this funding had anything to do with recent government regulations concerning funding of M&A deals by domestic lenders.

Knowing that this deal involves not only a famous international brand, but it will also result in strengthening one of China's key industries, I'm gonna assume that this was seen quite favorably by the top guys here in Beijing. Once that happens, I suppose it doesn't matter what legal framework is utilized to process the financing. However, if this deal does technically fall within the scope of the new rules, it would be interesting to know.

Maybe some Net surfing is in order. If I come up with anything, I will update accordingly.

Tags: China Business & Economy, China Law