DUESSELDORF, Germany (Reuters) – Germany’s Thyssenkrupp <TKAG.DE> expects the coronavirus crisis to cause a new financial squeeze, scuppering hopes that selling its elevator business would deliver a swift cash respite for the embattled firm, its management board told staff in a letter.
The elevator division was sold in February to ease financial pressure on the conglomerate which has struggled for years after ill-fated investments. But the coronavirus crisis has dealt a blow before cash from that sale arrives in June.
Sources said last week that Thyssenkrupp had secured about 1 billion euros ($1.10 billion) in state aid to tide it over until sale proceeds arrive.
“In the medium term, the cash outflows caused by the corona (crisis) will in all likelihood result in the financial leeway created by the sale of the elevator business becoming much lower than what was originally anticipated,” the board wrote to staff.
“We are preparing solutions for this,” according to the April 30 letter signed by Chief Executive Martina Merz that was seen by Reuters and first reported by German daily Handelsblatt.
Thyssenkrupp agreed to sell its elevators division to a consortium of Advent, Cinven and Germany’s RAG foundation for 17.2 billion euros in February, with proceeds expected to be received in June.
A source said the loan from state development bank KfW would assist the conglomerate, which has suffered from slow demand for auto parts after carmakers shut down production because of the pandemic. The loan expires at the end of September
Car makers and suppliers have scrambled to shore up their liquidity as sales in Europe tumbled by more than 50% in March.
Thyssenkrupp has been pummelled in recent years by a downturn in the car market, multiple leadership changes and an overly complex group structure. Its shares hit historic lows around 3.20 euros in mid-March.
As well as selling its elevator business, Thyssenkrupp’s restructuring involves seeking buyers for its Plant Technology division, which builds cement, chemicals and fertiliser plants.
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(Reporting by Tom Kaeckenhoff; Writing by Joseph Nasr; Editing by Edmund Blair)