London - Volkswagen debt outlook was
raised to stable from negative at Fitch Ratings, which said the bulk of
operational and financial risks from the carmaker’s diesel-emissions scandal
are now known.
Fitch also affirmed
Volkswagen’s BBB+ long-term debt rating, three ranks above junk, saying after
the market closed on Tuesday that while the possibility of further legal action
related to emissions has not disappeared, the risks to the Wolfsburg,
Germany-based carmaker have become manageable. The stable outlook means
the credit-reporting firm is unlikely to change VW’s rating soon.
“In particular, we believe
that the group could accommodate several billion Euros in additional fines
and/or recall and repair costs and still sustain its current ratings,” Fitch
said in a statement. VW has demonstrated “a strong resilience” since the
start of the emissions crisis in September 2015, with only a limited impact on
credit metrics seen by the “exit point” of 2019-2020, when the bulk of cash
outflows will hit.
Volkswagen has set aside
22.6 billion Euros ($25.7 billion) so far to pay for fixing or buying back
vehicles, fines and other penalties. It faces further costs from lawsuits
related to its rigging of as many as 11 million diesel-powered cars worldwide
to cheat on emissions tests. The carmaker, the world’s largest, is also in the
midst of a reorganization that Chairman Hans Dieter Poetsch is overseeing to
prevent a repeat of the scandal.
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The carmaker’s shares
declined 0.3 percent to 133.70 Euros as of 9:27 a.m. in Frankfurt,
valuing the company at 68.1 billion Euros. Its 1.5 billion-euro bond maturing
in October 2023 traded down 0.1 percent at 100.47 Euros.
Fitch lowered Volkswagen’s
rating to BBB+ from A in November 2015 with a negative outlook, saying the
scandal raised questions about management and internal controls.
The firm stood by the rating
last June after provisions against the crisis hurt earnings, while saying the
group was showing resilience and had improved visibility.