Sweden’s Volvo Cars has raised some 2 billion Swedish crowns ($215 million) in a bond issue just five months after the Chinese-owned carmaker terminated plans for a stock market flotation, blaming trade tensions and a downturn in the sector.
Carmakers like Volvo face heavy expenditure in developing electric and driverless cars, just as diesel engines fall out of favor and major Chinese and European markets stutter.
Volvo, which is developing electrified performance brand Polestar and owns a stake in parent Geely’s stablemate Lynk&Co, is spending about 5 percent of its annual turnover building electric and autonomous vehicles.
The company, that had 2018 revenue of 252.7 billion crowns and net cash of 18.03 billion, had frequently stated it would fund the development with internal resources and did not required external help.
But CEO Hakan Samuelsson stated this month that external finance was required to support the development of electric cars and that the automaker was discussing Chinese and U.S. tech investors.
Samuelsson had in late November ruled out Volvo raising funds through a bond offering in the short term, stating it was not the right time as markets were too turbulent.
A Volvo spokesman stated the new bond, which matures in February 2023 and pays a floating coupon of STIBOR (Stockholm interbank offered rate) plus 2.30 percent, would be utilized for general corporate purposes and not for a particular project.
The bond was released under Volvo’s Euro medium term note program. Handelsbanken, Nordea and SEB are the bookrunners on the transaction.