Renault may wait on Volvo sale, eliminate $6.8B in debt

Renault SA may keep its Volvo AB stake until a rebounding heavy-truck market boosts the price 25 percent, allowing the carmaker to raise about 50 billion kronor ($6.8 billion) and wipe out most of its debt.

France's second-biggest automaker will probably wait for Volvo's improving outlook to push the stock to 112.5 kronor before unloading its 21.8 percent holding, the average estimate of 10 analysts surveyed by Bloomberg shows. The stock has gained 47 percent this year, closing yesterday at 90.15 kronor.

Chief Executive Officer Carlos Ghosn pledged last month to reduce the carmaker's net debt of 5.9 billion euros ($7.8 billion) through non-strategic asset sales. Banks are preparing to bid for the stock sale and expect invitations soon, according to people at two financial institutions, who asked not to be identified because the discussions are confidential.

"Renault's under no real pressure to refinance right now, so Ghosn can wait for the U.S. recovery to be better reflected in Volvo's share price," said Max Warburton, a Sanford C. Bernstein analyst in London who correctly predicted Renault's share-swap deal with Daimler AG three weeks before the April 7 announcement.

With credit conditions improving and a 3 billion-euro French government loan repayable next year at the earliest, Renault "may wait until then and do a clean swap," he said.

Volvo, along with European rivals Daimler AG, MAN AG and Scania AB, this month reported first-quarter earnings that beat analysts' estimates as demand for heavy trucks improved. Volvo on April 23 posted net income of 1.68 billion kronor, its first profit in more than a year. Analysts had forecast a loss of 8 million kronor. The shares gained 10 percent.