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Interview Ė Olivier Casanova Olivier Casanova explains the main challenges facing PSA Peugeot CitroŽn and describes the setup of the company's finance and treasury management team.

Interview - Olivier Casanova

Finance and Treasury Manager, PSA Peugeot Citroën

“A more balanced debt profile”

Le Lettre du Trésorier

You were named as the finance and treasury manager of PSA Peugeot Citroen at the beginning of 2010. What have been your main tasks since then?

Olivier Casanova

After the end of the worldwide financial and economic crisis, PSA had a small net debt, but a gross debt and increased financial expenses. Consequently, one of our priorities was to improve our balance sheet, along with other objectives: to manage peak funding in anticipation for 2011 and 2014; to repay in advance the five- year loan of €3bn from the State in April 2009; to increase the average maturity of our financing; reduce the level of financial security to return to their pre-crisis levels; and overall, lower financial expenses. If we keep in mind only the more salient points, the plan of action has three parts. We have decided to renegotiate a syndicated credit of €2.4bn over three years, one year ahead of the maturity date. We have done this with a pool of twenty-one banks, fourteen of which are abroad, two are new and thirteen have raised their level of involvement. The negotiation has ended in an assorted credit of three years with two options to extend it by a year, under conditions which we have deemed satisfactory. In the summer of 2010, we approached the APE [the French Government Shareholding Agency] intent on repaying the loan from the State ahead of the due date, which we did in three stages in 2010 and the beginning of 2011.

Taking into account the terms and conditions of the contract with the State – a base rate of 6% and a supplementary rate linked to the company’s operating profit – the cost of this financing exceeded the payment required by the bond investors by around 300 basis points. The third aspect was market financing, which added up to €2bn: in June 2010, we raised €500m in five years and carried out, at the same time, a bid on bonds which mature in 2011, which ended in a buyout of over €245m; in October, we issued three-year and six-year bonds, each for €500m; in January of this year that original amount had increased by €350m and €150m respectively. The outcome of these operations is as follows: a lengthening of the average maturity of our debt to four and a half years, a more balanced debt profile in the long term, a better distribution of financial sources, and a significant reduction in costs: without these measures, financial expenses would have surpassed €500m in 2010, and for 2011, we anticipate a rise of €350m, which corresponds to a saving of some 30% in two years.

These operations concern PSA’s industrial and commercial activity. But you are also in charge of the balance sheet for Banque PSA Finance, which funds the stocks of distribution networks and clients, whether individuals or businesses.

To give you an idea of the size, Banque PSA Finance’s balance sheet was around €27bn at the end of 2010, €22bn of which was external financing – 55% from the markets, 22% from banks, 16% from securitisation and 7% from other sources – and the annual needs of medium-term financing normally represent €6 to 8bn. In order to desensitise the balance sheet as much as possible to changes in interest rates, the assets and the liabilities are adjusted, aided by swaps, currently by about eight cents, for a total of €24bn. 2010 was marked by the thawing of the securitisation market, which allowed us to raise €500m by yielding to German leasing debt, and, more classically, through seven operations on the bond market for a total of €4.2bn, through sustained activity on the commercial paper and certificates of deposit markets – our average reserve of short-term financing was around €4bn - and, finally, through ever-important bank financing. Concerning the current year, we have already proceeded with three offerings on the euro market, for a total of €2.4bn , and above all, we have undertaken our first bond issue, a type 144A in the United States, with four tranches, fixed at three, five and ten years and three floating years, for a sum of $1.25bn dollars, with the aim of regularly approaching this market in the future.

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