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Magna plans to raise up to $2-billion in debt

Don Walker, CEO of Magna International, addresses shareholders during the 2013 annual general meeting of the company in Toronto May 10 2013.

Fernando Morales/The Globe and Mail

Magna International Inc. has filed plans to raise as much as $2-billion (U.S.) in debt over the next 25 months as it moves toward reducing its cash hoard and taking on a limited amount of debt.

The auto parts maker filed a shelf prospectus with securities regulators in Canada and the United States Monday that reveals the move, but does not outline what type of debt it will issue.

"Consistent with Magna's recently stated intention to accelerate the use of its balance sheet, this filing is intended to give the company flexibility to take advantage of financing opportunities as it sees fit, subject to market conditions and other relevant factors," the company said in a statement.

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Magna is moving toward a more cash-neutral position – a change in philosophy from the days when founder Frank Stronach was its chairman and controlling shareholder. Mr. Stronach all but banned the company from going into debt after Magna hit a debt wall in the early 1990s and underwent a major financial restructuring.

Mr. Stronach's conservative attitude toward debt enabled the company to build a cash pile that helped it withstand the 2008-2009 auto industry crisis and the bankruptcy protection filings of two of its largest customers, Chrysler LLC and General Motors Co.

In other documents filed with securities regulators, Magna said it returned about $1.3-billion to shareholders in 2013 in the form of dividends and share buybacks.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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