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Thyssenkrupp Warns of More Losses Using Up Elevator Cash

Thyssenkrupp Rising Debt Gnaws at $19 Billion Elevator Lifeline

(Bloomberg) -- Thyssenkrupp AG warned losses could surge in the third quarter due to the coronavirus crisis, further eating into cash from a multibillion-euro elevator sale that was meant to fund a turnaround.

The engineering conglomerate said it could lose 1 billion euros ($1.08 billion) this quarter after its net after-tax loss widened about 40% to 1.31 billion euros in the six months through March. That helped push net debt to 7.55 billion euros, a figure likely to rise as the pandemic hurts the global economy.

The worsening financial situation means the firm will have less room to deploy funds from its 17.2 billion-euro elevator business sale. Once a paragon of German industrial prowess, Thyssenkrupp is fighting for survival, and Chief Executive Officer Martina Merz hoped to use some of the proceeds from the sale of the elevator division to a group backed by Advent International and Cinven to boost ailing units or spruce them up for sale.

“It’s already clear now that the coronavirus will significantly reduce our leeway,” Merz said, adding executives would present restructuring plans to the firm’s supervisory board in the coming week. The elevator deal is expected to close later this year.

The engineering giant, which first withdrew its full-year guidance in March, said it was impossible to give an outlook for the whole year due to economic uncertainty. Thyssenkrupp’s shares dropped 10% by 9:59 a.m. in Frankfurt, reaching the lowest in more than a month. The stock has fallen 64% this year.

More on Thyssenkrupp’s crisis:

Thyssenkrupp’s 1.5 billion euro notes due 2024 were down 6 cents on the euro to 84 cents on Tuesday, most since they were issued in February 2019, according to data compiled by Bloomberg.

Before the pandemic swept the globe, the company had been bruised by a slowdown in Chinese and German manufacturing, rising pension costs and falling demand for European steel.

The virus is complicating its attempt at recovery. While the firm’s steel division was already wrestling with a global steel glut, demand took a further hit as the outbreak spread in March, Thyssenkrupp said. Production outages at automotive plants could also significantly dent sales at its components businesses.

Thyssenkrupp confirmed it agreed a 1 billion-euro credit line from a consortium of banks led by Germany’s state-owned lender KfW.

©2020 Bloomberg L.P.