Porsche Credibility
Discussion
A bit of an obscure question here...Porsche were the most profitable car company in the world last year.However according to the bond markets(through which porsche occassionally borrow) their credibilty has been hammered in the last few months.Rumours of a bigger buy out of VW is one of the major excuses i.e bigger debt burden, however does anyone else have any other ideas as to this downgrading of the company?.Maybe the amount of new models flooding the market is eventually affecting the value of the brand? and Porsche financially may have overstretched themselves with all the development costs?.Not good for residuals potentially?Any thoughts(other than what the f@ck is kayc talking about?)greatly appreciated...
They did announce a few months back a huge development investment in the Panamera, so maybe that has some influence. The markets tend to have a short view of the world. I'm sure when the Panamera rolls of the production line and starts selling like hot cakes, Porsches credibility in the finacial world will get a big boost. Happened with the Boxster and the Cayenne.
silver993tt said:
They did announce a few months back a huge development investment in the Panamera, so maybe that has some influence. The markets tend to have a short view of the world. I'm sure when the Panamera rolls of the production line and starts selling like hot cakes, Porsches credibility in the finacial world will get a big boost. Happened with the Boxster and the Cayenne.
Yep. Also Porsche pay for the development of new cars out of operating profit - so when the car is in manufacture its all gravy - nothing to "pay back" AIUI. So their costs are "artificially" higher - but if the new car bombed they wouldn't go bust.
A couple of years back they were being lauded for having done some very smart hedging against the risk of the US$ falling versus the €. This paid off very nicely, but maybe further hedging arrangements are no longer economically viable?
Maybe also related to Cayman sales figures - anyone heard any concrete news on how they're doing?
Maybe also related to Cayman sales figures - anyone heard any concrete news on how they're doing?
francisb said:
the problem is anyone who trades or understands bond spreads likely works for an investment bank, who would likely get upset about anyone talking about clients or "offering investment advice" on a public forum. ask me an fx question, its unregulated.
I understand bond spreads.....i dont understand that a supposed financially astute company making record profits has its finacial credibilty undermined so badly in a short period of time. BMW and Vw are valued much higher from a credit rating point of view.kayc said:
Any thoughts(other than what the f@ck is kayc talking about?)greatly appreciated...
Have you switched from Govvies to Corporates then Kev? Maybe too simplistic a view here but there's been a lot of volatility in equities over the past couple of months (global inflation fears etc) and that will have an effect on all corporate spreads - not just Porsche paper.
barry_j said:
kayc said:
Any thoughts(other than what the f@ck is kayc talking about?)greatly appreciated...
Have you switched from Govvies to Corporates then Kev? Maybe too simplistic a view here but there's been a lot of volatility in equities over the past couple of months (global inflation fears etc) and that will have an effect on all corporate spreads - not just Porsche paper.
Adam B said:
wouldn't the R&D be capitalised and spread over the life of the model so no peaks or troughs in operating profit(in an accounting sense, not cash flow)? My German GAAP is a bit rusty!
Nope - they take it all upfront. Did exactly the same with the Cayenne. By the time the car is on sale the R&D will be fully expensed.
Not a bond expert but I reckon it must be the VW situation. Too much uncertainty for the markets?
Barry_j - would explain alot if that is the case
Anything in consumer finance is taking a hammering at the moment with the view that the economy is going to take a bit of a hammering in the near future
Presumably its the securitisation of the car finance portfolio - its likely to get a downgrade as people view the risk of individuals defaulting on payments to the finance company to be increasing?
Anything in consumer finance is taking a hammering at the moment with the view that the economy is going to take a bit of a hammering in the near future
Presumably its the securitisation of the car finance portfolio - its likely to get a downgrade as people view the risk of individuals defaulting on payments to the finance company to be increasing?
barry_j said:
francisb said:
the euro feb 16's are DE024231046 (on reuters)
kayc said:
Just go Corp TK Porsch then you get the list..
Correct me if I'm wrong but thats not Porsche - thats the finance company.
ie the hire purchase / lease purchase finance provider if you buy your car on credit
bermyandy said:
Presumably its the securitisation of the car finance portfolio
No, its simply the finance company financing itself by issuing debt and yes it would be volatile for the reasons that you have mentioned. A securitisation would be less volatile as you'd have a ring-fenced pool of loans to which the bondholders would have recourse whereas buying bonds issued directly by the finance company gives you exposure to the company as a going concern.
So, to go back to Kev's initial question, whereas there is linkage between the manufacturer and the finance company, you can't assume that if the finance company is doing badly that the manufacturer is too. Also you can't compare Porsche Finance with VW or BMW finance; they are very different companies - size for a start.
Sorry to bore the non-city ph'ers
Edited by barry_j on Tuesday 20th June 16:48
barry_j said:
Also you can't compare Porsche Finance with VW or BMW finance; they are very different companies - size for a start.
"RATING AGENCY COMMENT
Porsche has upheld its unrated credit rating status for over five decades. This is partly due to its majority family-run ownership, according to Emmanuel Bulle, director in the European industrials team at Fitch Ratings in Paris. "There are some companies not willing to give any information or comments to the public and Porsche is a good example of that," says Bulle. Regardless, Bulle says Porsche remains an attractive credit from a bondholder perspective because of its strong name recognition."
www.creditmag.com/public/showPage.html?page=320273
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