PSA/Peugeot-Citroen gets a lifeline as EU signs off on debt issuance

There is some good news for PSA/Peugeot-Citroen as it gets a finance lifeline from the European Union.

The company has recently received the approval of the EU to receive up to €7 ($9.28) billion in debt issuance from the French government. The fund will allow the company to strengthen their Banque PSA Finance division which has been hit by a series of credit downgrades off lately. These downgrades resulted in higher borrowing costs which the company passed on to PSA/Peugeot-Citroen customers who wanted to finance or lease vehicles.

As per the deal, PSA/Peugeot-Citroen will be obligated to refrain from making any major acquisitions and also would be required to maintain the margin for loans granted by Banque PSA Finance to dealers.

The company still faces an uphill task but the European Commission believes that PSA/Peugeot-Citroen’s restructuring plan, together with the undertakings from the French authorities, will enable the PSA group to return to viability, and at the same time protecting in a balanced way the interests of competitors who have not had public funding.

Well let us hope the problems of the company would be reduced and now the benefits would be transferred to its customers who have been bearing the pain of the prince increase by the company.