May 19, 2020 / 4:52 PM / 17 days ago

Car parts maker Benteler's move out of Germany haunts state aid hopes

FRANKFURT (Reuters) - Car parts’ maker Benteler’s move from Germany to Austria in 2010 cut its tax bill but may now create a hurdle as the company seeks to access state support during the coronavirus crisis.

Benteler’s sales have slumped as demand for new cars collapsed in the wake of the pandemic, people familiar with the matter said, compounding problems at the family-owned company which mandated Rothschild last year to advise on strategic options after losing money on an ill-fated U.S. expansion.

Benteler, which makes chassis components, steel tubes and exhaust systems, said it is now holding restructuring talks with creditors.

Three sources familiar with those talks said the company is considering applying for state-backed loans in Germany - where it employs 9,000 people out of a global workforce of 27,000 - but said its tax status could ruin its chances.

“Having left the country to lower its tax bill will make talks on securing help from the German government very difficult,” one of the sources said.

The German government declined to comment. How much state support Benteler would require is yet to be determined, the sources said.

Benteler, which is already getting aid in the form of state-sponsored shortened working hours in Germany, said it is seeking state support in various countries.

As part of German government efforts to help companies weather the coranavirus crisis, state bank KfW can provide liquidity support for companies’ activities in Germany even if they are headquartered abroad, depending on their financial status.

KfW has already paid out roughly 20 billion euros ($21.84 billion) in total in emergency loans during the pandemic.

A number of companies in Germany, however, have faced scrutiny over their tax behaviour as they try to secure state support.

Airline Lufthansa (LHAG.DE) issued a statement last week to provide transparency about its business activities in so-called “tax havens”, after some German politicians had criticised an impending 9 billion euro bailout, saying it would go to a company that seeks to lower its tax bill through overseas subsidiaries.

Benteler has net debt of 2 billions euros, mostly loans, according to the sources.

“We are currently examining whether we - like many companies in the automotive industry - can take advantage of economic support programmes in the context of the corona pandemic,” the Benteler spokeswoman said.

“The fact that Benteler has set up a holding company in Austria is clearly not helping in this context (of getting state loans from Germany),” another source familiar with the restructuring talks said.

The sources said Benteler was also unlikely to get state support from the Austrian government as it only houses its HQ there and employs less than 100 people in the country.

The spokeswoman for Benteler said its restructuring efforts are continuing.

The company’s leading lenders, including Commerzbank, DZ Bank, LBBW, NordLB and Erste Group, have mandated law firm Latham & Watkins in talks on stabilising the company which are unlikely to yield a result before the autumn, the sources close to the matter said.

The banks and law firm declined to comment.

“Talks are at their beginning. But I do not see the (German) state playing any role”, one of the sources familiar with the restructuring talks said.

Additional reporting by Christian Krämer; Editing by Susan Fenton

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