Schaeffler Deal Details Emerge

The battle for car parts supplier is almost over, as the company reached an agreement with its lender banks for the 12 billion euros in debt it now holds. The so called refinancing, as it was announced last week, may prove to cost Schaeffler more than it initially anticipated, Financial Times Deutschland reported.

According to the agreement between the supplier and the banks, apart for the already high interest rates for the new loan, Schaeffler may be forced to repay its debts by selling the Continental shares which got it into trouble.

Schaeffler will merge with Continental following the guidelines established in the four-phase model of the so called "Project Fairplay," developed by consultancy agency Roland Berger. The first three phases, to be finalized by June 2010, call for the reorganization of Schaeffler's structure. The fourth phase, or the merger itself will conclude afterwards, even if no deadline for it has been set.

Problems for Schaeffler began and developed pretty much the same way as in the Porsche-Volkswagen affair. In 2008, Schaeffler made a $18 billion push for a hostile takeover of auto supplier Continental. In the end, the company ended up owning more shares that they could afford, slowly sinking into debt.

The relationship between the two companies deteriorated even further this year and culminated this months with the replacement of Continental's CEO, Karl-Thomas Neumann, with one of Schaeffler's managers.

Schaeffler owned, prior to the crisis, 49.9 percent of Continental directly and another 40 percent together with banks. The recent agreement made Continental share all of its stake in Continental with the lender banks.