Geely’s Liabilities Surge to $153.8 million

China’s Geely Automobile Holdings Ltd (Owner of Swedish Volvo) announced that it will raise $153.8 million through a corporate bond sale aimed at repaying its bank loans and supplementing the operating capitals, reported Tuesday.

According to statistics revealed by Geely, the company’s liabilities have been increasing at a fast pace over the past three years. The homegrown automaker is now facing a liability of 71 billion yuan, which surged from 16 billion in 2009 and 4.78 billion yuan in 2008, the website reported.

Cao He, an analyst with China Minzu Securities, told the reporter that the main reason for Geely’s high liability was that when the company merged with Volvo, it also inherited its high debt. The reasonable leverage for auto companies should be around 60 percent but Geely now faces a leverage of 73.4 percent, according to the news report.

The leverage itself cannot decide the company’s operation status, Cao told the reporter. “The liabilities structure should also be taken in consideration.”

Geely reported earlier this month that its sales in the first six months totaled 213,400 units, a nine-percent growth year-on-year, which only accounts for 44.5 percent of its sales target this year.

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