By Ian Chua
SYDNEY, April 2 (Reuters) - Just one year after setting up shop in Australia, the financial services unit of Europe's biggest carmaker Volkswagen AG is planning to further raise its visibility here by tapping into the local debt market.
Executives from the carmaker are currently in town meeting investors to gauge interest for their paper and market a recently established A$1.0 billion ($610 million) debt issuance programme.
"We'll start with commercial papers first... and if the spreads are a little bit more favourable, then... we could also go ahead with the bond programme," Hans-Peter Lutzenkirchen, board member of VWFS AG and Chairman of VW FS told a media briefing on Wednesday.
It also has, among others, an 18 billion euro debt issuance programme, and a 60 billion yen commercial paper programme.
Volkswagen is rated single-A plus/A1 by Standard & Poor's but has a negative outlook that S&P said was due to concerns about the long-term competitive challenges facing the company and the limited leeway available to its current ratings.
"If free cash flow generation and net liquidity do not improve in 2004, the rating could come under pressure," S&P credit analyst Maria Bissinger said in the report released last week.
SECTOR-WIDE GLOOM
Lutzenkirchen said the negative outlook assigned by S&P was more a reflection of a shift in confidence in the automotive sector globally.
"It's not a specific Volkswagen issue," he said, but acknowledged the Iraqi war has made a tough environment for carmakers even more difficult.
Earlier this week, Volkswagen reported a 17 percent fall in its U.S. car sales from a year ago. It has also said unfavourable exchange rates and weak markets on both sides of the Atlantic will mean a drop in profits this year.
But Lutzenkirchen said the company remained convinced a recovery in the car industry was on the way and that it was going ahead with the launch of 20 new models this year to spice up sales.
"If the recovery will be there as we believe, then the negative outlook will have no impact on our rating," he said, adding he was sure the company can maintain the ratings which it has held for the past 10 years.
Helge K. Hiller, senior manager, assistant to the board of management at VWFS AG, told Reuters the company plans to be a repeat issuer in the local market.
But what is eventually offered will depend very much on the pricing agreed by the company and investors, he added.
($=A$1.64)