Bupa Sells Hybrid Bonds to Fund Acquisitions, Boost Capital

Bupa Insurance Ltd., the private U.K. insurer and health-care provider, sold 500 million pounds ($764 million) of hybrid bonds to help fund acquisitions.

The 10-year subordinated notes, which combine features of debt and equity, were priced to yield 355 basis points more than gilts, according to people familiar with the sale, who asked not to be identified because the details are private. The company’s Bupa Finance Plc unit issued the securities, adding to a record $21.7 billion of hybrid debt sold in euros and pounds this year, according to data compiled by Bloomberg.

Bupa completed its acquisition of Lux Med Group, Poland’s largest private health-care provider, from private equity firm Mid Europa Partners for 400 million euros ($522 million), the London-based company announced April 11. Bupa is planning to buy Dental Corporation, the largest dental group in Australia and New Zealand, it said in a Dec. 17 statement.

“Some of the proceeds will be used to support, in part, our Lux Med and Dental Corporation acquisitions,” Bupa Group Treasurer Gareth Evans said in an emailed response to questions. “Still, the rationale for the bond issue is to enable Bupa to further enhance its prudent liquidity and solvency capital positions and provide a further buffer for growth opportunities.”

Hybrid notes allow companies to borrow while reducing the risk of a credit downgrade because ratings firms typically count 50 percent of the bonds as equity, reducing their assessment of an issuer’s indebtedness.

Moody’s Investors Service assigned a Baa3 rating, the lowest investment grade, to Bupa’s hybrid bonds in an April 15 report. Fitch Ratings gave a preliminary rating of BBB, the equivalent of one step higher.

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