Thyssenkrupp rejects steel unit's request for funding

Thyssenkrupp announced on Saturday that its steel division would need to be restructured in order to fund its investment needs from its own earnings. However, the parent company has provided financial security for two years.

Thyssenkrupp's CEO, Miguel Lopez made the comments after the chairman of its steel division stated that the company needs to close a funding gap of 1.3 billion euros ($1.4 billion).

Sigmar Gabriel, of Thyssenkrupp Europe (TKSE), made the comment about funding late Friday night after a meeting of the supervisory board.

The parent company reduces its stake in this unit that is struggling with a decline in steel prices and demand.

Lopez stated that the goal of the ongoing turnaround effort was to allow TKSE earn enough money to fund its investment requirements and to be able to deal with any temporary down cycles in the future.

He also warned against speculating about insolvency.

Thyssenkrupp AG will cover the financial needs of Steel Europe over the next 24 month. This should end all speculation. Insolvency was never a threat and it won't now," Lopez stated in a press release.

The dispute arose after a new investor, Czech billionaire Daniel Kretinsky, closed the sale of a 20% stake at TKSE last week and is now in negotiations to purchase a further 30%. Kretinsky attended Friday's meeting of the board.

Gabriel, the former federal minister, said Friday that an external audit will be conducted before the end the year in order to determine the unit’s funding and restructuring needs.

Lopez said on Saturday that the audit will help to put TKSE into a more "serious and realistic" perspective.

Since years, the sale of TKSE has been fraught by difficulties, mainly because of the need for billions of euro to continue investing and regain its competitiveness. (Reporting and editing by Clelia oziel; reporting by Ludwig Burger)

(source: Reuters)