Daimler AG executives move to bolster the company’s financial position during the coronavirus pandemic.

Daimler AG lined up a new multibillion-dollar line of credit and tapped the bond market for 1.5 billion euros to help weather the coronavirus pandemic that has brought the global economy to a halt.

The German automaker announced it increased its financial flexibility with a loan facility agreement in the amount of 12 billion euros. This is in addition to the existing 11 billion euros revolving credit facility with a term until 2025 including extension options. The additional loan facility can be utilized within a 12-month period with two extension options of six months, Daimler said.

The loan facility was agreed with the four lenders BNP, Banco Santander, Deutsche Bank and JPMorgan on April 1, 2020. Syndication has started. In addition, Daimler also accessed the euro bond market earlier last week with the successful issue of a €1.5 billion five-year benchmark bond.

(Ford’s credit rating dropped to junk by Standard & Poor’s.)

GM CEO Mary Barra says that the company’s $16-billion draw down of its credit lines is designed to bolster its cash position during the pandemic.

Like other automakers dependent on vehicles sales in the U.S., China and Western Europe, Daimler is moving to bolster its finances.

“We would not be surprised if Daimler is indeed seeking to raise a new credit facility,” RBC Capital Markets analyst Tom Narayan said in a note to investors. “The cash cushion between funding need – for maturities in 2020 – and funding available was already narrow to begin with.”

Global automakers are facing enormous challenges since the pandemic crippled consumer demand across the globe. Governments have imposed restrictions on citizens, businesses and transportation to fight the outbreak.

(GM taps credit lines to guard against virus.)

In addition, Daimler and other European manufacturers were forced to halt output at their factories in the region and have since expanded closures to sites in North America. A rapid decline in car demand prompted Standard & Poor’s last week to lower credit ratings on Daimler and BMW AG by one notch.

Moody’s had already cut Ford’s credit rating when S&P moved the company’s credit as well as its unsecured debt to junk status.

The move mirrors actions taken by Ford and General Motors in the U.S. in recent weeks. Ford suspended its dividend and drew $15.4 billion from its credit lines to ensure it had the cash needed to weather the tough times.

General Motors Co. announced plans to draw $16 billion from its revolving credit lines, taking what it described as austerity measures. GM also said it was suspending its 2020 guidance due to uncertainty around the business impact of the COVID-19 pandemic.

(Analysts warn auto sales forecasts looking dire.)

Ford’s credit rating took a hit for the move. Moody’s downgraded Ford Motor Co. credit rating to just above investment grade. Standard & Poor’s cut Ford Motor Co.’s credit and unsecured debt ratings to junk territory, trimming the company’s rating to BB+ from BBB-, while Moody’s placed the credit rating of General Motors, Fiat Chrysler and Ford, even though it just cut its rating, on review.

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