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December 2, 2009

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Home » Business » Auto

Geely seeks US$1b for its Volvo bid

GEELY, the Chinese car maker picked as preferred bidder for Ford Motor's Volvo unit, is seeking at least US$1 billion in loans from Chinese banks to finance its US$1.8 billion bid, sources said yesterday.

Home-grown Geely, which means "lucky" in Chinese, is hungry for modern and innovative technologies from the Swedish brand to upgrade its car lineup and tap the auto market in China, the world's biggest.

At least three major Chinese banks, the Bank of China, China Construction Bank and the Export-Import Bank of China, had agreed to extend loans to Zhejiang Geely Holding Group, the banking sources briefed on the plan.

"Money is not a problem for Geely," one said. "They definitely have strong support from Chinese banks, and there are a number of private equity funds queuing up to invest in Geely."

Last month, Volvo's union leaders held their first talks with Geely but were still waiting to see Geely's financing plans for the loss-making Swedish car maker.

A Geely spokesman in Beijing declined to comment on the loan plans but said Geely was still in negotiations with Ford to finalize details of the takeover. He declined to elaborate or comment on the time frame for the deal, which analysts and industry sources expect to be finalized by early next year.

All three Chinese banks involved said they would not comment on specific loans to clients.

Last week, Geely reached agreement with Ford on intellectual property rights issues in its bid for Volvo, clearing a major barrier for the deal. The remaining issues for Geely to negotiate with Ford, such as long-term strategy for Volvo's sales and production, would be much easier to solve, said an industry source close to Geely.

Geely also needs to build relations with Volvo's management, union leaders and the Swedish government, which are part of the negotiations.

Global car makers such as Volkswagen and General Motors are stepping up their presence in China, where Geely sells models such as the Free Cruiser and Geely Kingkong.

Helped by government subsidies, the Chinese car market overtook the United States as the world's largest earlier this year.

The loans backing Geely's bid for Volvo are expected to have a five-year tenor, said another of the sources.

Bohai Industrial Investment Fund, a private equity fund backed by the Chinese government, was also in talks with Zhejiang Geely Holding Group, the parent of Hong Kong-listed Geely Automobile, to support its bid for Volvo, the sources said.

Ford and Geely have not disclosed a possible sale price for the Volvo deal.


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