EU Approves France’s Loan Guarantees for PSA Bank

The EU has ruled that the French government's guarantee of €7 billion loans to PSA Peugeot Citroen's finance arm will not significantly distort auto competition in the region.

In return, PSA has agreed to take "corrective action" if its debt nears an unspecified threshold and limit its acquisitions to €100 million per year, unless the EU approves a larger deal. The acquisition limits also apply to affiliate parts maker Faurecia SA.

France agreed last October to stand behind as much as €7 billion of Banque PSA Finance's debt for four years. The guarantee helps hold down the unit's borrowing costs, thus enabling it to continue making loans to PSA's customers at competitive interest rates.

EU anti-trust authorities declared that aid to the bank constituted support for the entire company. But in February the Brussels-based group granted permission for France to back an initial €1.2 billion of the bank's bonds.

On Tuesday the EU issued a separate approval of France's €86 million of funding for PSA's diesel hybrid program.