Polestar Automotive (NASDAQ: PSNY) announced that Volvo Cars has agreed to convert approximately $274 million of its outstanding shareholder loan into equity, according to a company statement.

Following completion of a previously announced $300 million debt-to-equity conversion by Geely Sweden Holdings AB, Volvo Cars plans to conduct a second conversion of approximately $65 million later in the second quarter. After both conversions, Volvo Cars' ownership in Polestar will remain at approximately 19.9%.

The maturity of the remaining $661 million shareholder loan has been extended to December 2031. The conversion price will be set at 95% of the 30-day volume-weighted average price in Polestar shares up to March 27, 2026.

The Swedish electric vehicle manufacturer also announced plans to consolidate future manufacturing of its Polestar 3 model in Charleston, South Carolina. The company stated this consolidation aims to drive operational efficiencies.

"We are grateful for the continued support from Volvo Cars in helping us to strengthen our balance sheet and reinforce our liquidity profile," said Michael Lohscheller, Polestar CEO.

The debt-to-equity conversion and loan extension are designed to strengthen Polestar's balance sheet and extend its debt maturity profile. The second conversion by Volvo Cars is subject to agreed deadlines and necessary regulatory approvals.

Polestar currently has four models in its lineup and vehicles manufactured on two continents. The company operates in 28 markets across North America, Europe, and Asia Pacific.