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Deal will fund repayment of previous instrument
◆ IG corporates pour into market ◆ Little sign of fatigue despite range of trades on offer ◆ EDP and Kering hit euros and RAC gets blowout response in sterling
◆ Smaller trades populate market after roaring week ◆ Air France KLM keeps hybrid momentum going ◆ Cencora and Icade bring no-grow bonds
◆ Transdev debuts among some big trades ◆ Abertis looks to pay zero premium on hybrid ◆ Heidelberg Cement pays low concession after big rally in its debt
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Moody’s downgraded Merck KGaA from A3 to Baa1 on Friday December 12, just four days after the German pharmaceutical company had issued €1.5bn of hybrid bonds as part of the funding of its acquisition of US life sciences company Sigma-Aldrich. -
Two German companies used hybrid bonds to finance acquisitions this week, underlining how corporate hybrid capital has come into its own in 2014 as a useful instrument in the corporate finance toolbox, especially for acquisitions. Merck's €1.5bn deal was its first hybrid, while Deutsche Annington's €1bn issue came just nine days after it had announced its acquisition, writes Richard Metcalf.
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German property company Deutsche Annington has issued a €1bn perpetual non-call seven year bond to fund its €9.4bn acquisition of its rival Gagfah, less than two weeks after the takeover was announced on December 1.
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German pharmaceutical company Merck issued its first hybrid bond, a €1.5bn dual tranche deal, on Monday, less than a week after Volvo issued its first piece of hybrid capital. Merck's notes carry a 2.625% coupon, a record low for corporate hybrid issuance.
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Volvo joined the growing group of corporate issuers of hybrid capital on Wednesday, when it priced its first hybrid bonds. The deal was popular with investors, generating €7.4bn of orders.
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Santos, the Australian upstream oil and gas company, has postponed its planned hybrid bond, after Opec’s decision to maintain production levels amid falling oil prices caused spreads to widen for energy companies.
