Daily Management Review

The EBRD Froze Credit for a Volkswagen Plant in Poland


The European Bank for Reconstruction and Development has suspended funding construction of a new plant of the German Volkswagen Group in Poland.

According to sources in the EBRD, quoted by the information agency Reuters, the bank froze disbursement of funds under the financing project for the new Volkswagen’s plant.

EBRD approved a loan of € 250 million for a German company in the middle of 2015. However now, as told sources in the bank, "the situation has changed." Bank will not refuse to continue funding the project, but conditions of the loan is likely to be changed.

The cost of building a new plant, pledged in Września in Western Poland, is € 1,1 billion ($ 1.2 billion). It is expected that the new plant will employ up to 3 thousand people.

Some experts have predicted that as a result of the Dieselgate scandal, the German group will face a worsening terms of attracting funding in the future.

In particular, at the beginning of December 2015 the rating agency Standard & Poor's analysts announced downgrading the credit rating of Volkswagen.

Short-term credit rating of Volkswagen AG in local and foreign currency, according to S&P, was affirmed at "A-2". The agency kept a "negative" outlook on the ratings of short and long term, which means likelihood of further deterioration in the credit assessment.

In a press release, S&P analysts aired the decision worsening financial prospects of the German company:

"The downgrade is obliged to the negative financial performance because of the "diesel scandal". Most likely, Volkswagen will face more difficult credit conditions in the future."

source: reuters.com