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Bankers Start Work on $7.7B Debt for VW Diesel Engine Unit
Everllence Divestment Would Follow ContiTech Carveout in Germany
Key Takeaways:
- Banks have begun marketing up to $7.7 billion in financing to support bids for a majority stake in Volkswagen’s Everllence diesel engine unit.
- The potential sale, valued at more than €5 billion, comes as VW streamlines operations amid competitive and financial pressures.
- First‑round bids are due soon and lenders are reviewing the unit as they assemble required loan and credit facilities.
Bankers are drumming up interest for as much as 6.5 billion euros ($7.7 billion) of financing to back the potential sale of a majority stake in Volkswagen AG’s heavy diesel engine unit Everllence SE.
A so-called lender education process is underway with a number of banks that could finance potential bids alongside some working capital, according to people familiar with the situation who asked not to be identified because the matter is private.
The automaker is working with Goldman Sachs Group Inc. and JPMorgan Chase & Co. on the divestment of the unit, which could be valued at more than 5 billion euros, Bloomberg reported previously. With first-round bids due shortly, bankers are trying to work out how to finance a deal.
The sale would be the second multibillion-euro industrial carveout in Germany this year as large corporations increasingly focus on their core operations. In a highly anticipated deal, bankers are currently assembling debt packages of around 2.5 billion euros toÌýbackÌýan acquisition of Continental AG’s industrial ContiTech unit.
Potential lenders will get an early look at the Everllence unit, which makes ship engines and power-plant turbines, because the company needs to lock in hefty borrowing lines. Such undrawn facilities are generally unpopular as they weigh on banks’ balance sheets. With the unit needing around 2 billion euros of guarantee and revolving credit facilities, any buyer will need to divvy that up among a large number of lenders.Ìý
Our partners, , have ordered 12 of our advanced, two-stroke dual-fuel engines, the Everllence B&W 8G95ME-GI10.5 EcoEGRTC, marking number 2,000 in our series of highly successful, two-stroke, dual-fuel engines 💚 — Everllence (@everllence_2025)
The benefit of these facilities is that they usually provide an easy route into underwriting the more attractive parts of the buyout financing — which generate some of the most lucrative fees in investment banking.
The financing is set to comprise around 3.5 billion euros to 4.5 billion euros of drawn facilities, the people said. That equates to around 4.5 times to 6 times the firm’s approximate 750 million-euro earnings before interest, taxes, depreciation and amortization, depending on whether an all-senior financing is used or senior financing alongside a payment-in-kind tranche, they added. PIK is a deeply subordinated debt instrument, where interest is compounded over the life of the loan and comes due at maturity.
The senior debt is expected to be in the form of leveraged loans, denominated in euros and dollars, the people said. High-yield bonds could also be considered, they added.
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Spokespeople for JPMorgan and Goldman declined to comment. Representatives for VW, Everllence didn’t immediately respond to requests for comment.Ìý
The Everllence sale comes as Volkswagen faces pressure to boost profitability and streamline its sprawling operations. The automaker faces increasing technological competition, flagging demand in major markets and new challengers like Tesla Inc. and BYD Co.
In December, VW’s Audi unit agreed toÌýsellÌýits majority stake in its Italdesign Giugiaro SpA subsidiary to California-based technology company UST. Audi’s performance-car brand Lamborghini will retain a significant stake in the Italian design business.
