Under pressure car maker faces new ignominy
22 June 2009

Porsche is set to face the ignominy of being refused a 1.75 billion Euro (£1.5 billion) state loan, according to reports.

Porsche applied for the loan earlier this month in a bid to ease its financing problems in the wake of its stalled bid for rival Volkswagen. It is currently 9 billion Euros (£7.5 billion) in debt.

Read Hilton Holloway's analysis: 'Porsche struggles to service debt'

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A senior government official has told the Financial Times newspaper that the chancellery and the finance and economics ministries had “informally agreed” to deny the company’s request after state-owned bank KfW advised against the move.

The decision, which could be formalised by a government committee by July, would raise the pressure on Porsche, whose search for cash is reported to be widening.

Porsche's chief executive Wendelin Wiedeking is in talks for the Qatar Investment Authority to invest up to 2.5 billion Euros (£2.1 billion) for a stake of about 25 per cent in the company.

However, new reports suggest Qatar may increase its stake further and that Daimler may either try to aquire a stake in Porsche or loan it money.

Daimler 'joins Porsche bidding'

That has upset VW, which sees Porsche as backing away from an agreement made by its controlling families last month. It sought to end Porsche’s financing woes by merging the two carmakers, but Porsche's executives are reported to be desparate to avoid this.

Porsche still has a chance to secure government funding as it can rework its application to KfW, but insiders say the chance of success is slim.

But, with ministers in the ruling left-right coalition voicing their scepticism about Porsche’s aim, its chances are slim.

Porsche has declined to comment on the status of its loan application.

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