Geely says bonds issued for buying parent plants

• Source: Gasgoo.com
• [17:51 September 28 2009]
• Comments

Geely Auto has announced that it will raise $334 million by issuing convertible bonds and warrants to an affiliate of Goldman Sachs, and the proceeds will be used for buying three plants of parent Geely Holding Group, who may bid for Ford's Volvo unit, the Economic Observer said today.

Hong Kong-listed Geely Auto said the investment of Goldman Sachs, who will hold over 15 percent stake in the Chinese carmaker, has nothing to do with Geely Group's possible buying of Volvo. The cash from the bonds is too small for the Volvo bid, but will be used for buying three plants of Geely Group, a Geely Auto executive told reporters. 

Earlier, Geely said money raised from the bond sale could be used for potential acquisitions. Some analysts think the investment could be related to Geely's bid for Volvo, and its chairman has also confirmed that the money will be only used to buy plants from its parent.

"We are issuing bonds to buy car-making plants from our privately held parent. As for overseas acquisitions, we have already finished most of that, including buying auto parts makers. The bond issuance is not related to anything else." said Li Shufu, Chairman of Geely Automobile Holdings Ltd.

And that could be true, because the Volvo unit is worth at least two billion US dollars. So the money Geely has raised this time is far from enough to buy it out. And that it's more likely that the money will used for expanding production.

Geely has a Shanghai venture with London-cab maker Manganese Bronze Holdings Plc. It also purchased the key assets of Australian gearbox maker Drivetrain Systems International earlier this year, gaining technology for making automatic transmissions.