VW ready to sell assets should loan repayment falter: sources

Europe's largest carmaker is under pressure to strengthen its finances as it is expected to have to pay out tens of billions of euros to cover fines, lawsuits and vehicle refits after it admitted to cheating U.S. diesel emissions tests and falsifying carbon dioxide emissions.

The biggest corporate scandal in the German company's 78-year history has forced out its long-time CEO, wiped billions of euros off its market value and hammered its bonds, making it much more expensive for the company to borrow through its traditionally-preferred route of the debt market.

VW secured the 20 billion euro bridging loan from 13 banks this week and is planning to refinance it by issuing bonds over the next couple of months, the sources said.

Under the terms, VW assured the lenders it would sell or list assets worth up to significantly more than 20 billion euros if it fails to find other sources of money, the people said.

Volkswagen declined to comment.

"No specific assets have been discussed," one of the people said, while another person said a potential emergency rights issue was also an option.

Investment bankers are pitching ideas to Volkswagen on potential ways to raise money, though decisions are unlikely before more clarity on the scope of penalty payments and recall costs have emerged, the people said.

Listings of divisions such as Audi, Porsche or its truck business - which is being carved out now - seem unlikely, but the non-truck parts of VW's MAN subsidiary are expected to be at the top of the list of potential divestments, the people said.

The MAN power engineering operations, whose products include ship engines, mini power plants, special gear units, propulsion components and testing systems may be valued at 4-5 billion euros in a potential deal, the people said.

The division accounted for all of MAN's 101 million euro nine-month operating group profit and for more than a quarter of its 9.98 billion in sales.

"Volkswagen may also consider divesting luxury car brands Bentley and Lamborghini or motor bike brand Ducati, although these units don't really move the needle," one of the sources said.

Separately, VW said the number of cars whose carbon dioxide (CO2) emissions and fuel consumption have been understated may turn out to be smaller than the 800,000 announced last month. VW has said it expects costs of at least 2 billion euros from the issue.

Investigations into the circumstances of the manipulations and number of affected vehicles have not been concluded yet, "but many CO2 levels have in the meantime turned out to be quite accurately measured," a spokesman said.

VW's Skoda subsidiary said on Thursday initial suspicions that the Czech brand was also affected by the CO2 malfeasance have turned out to be wrong.