RWE Said to Market Hybrid Bonds After S&P Cuts Rating OutlookSelcuk Gokoluk and Katie Linsell
RWE AG is selling euro-denominated hybrid bonds after Standard & Poor’s cut its rating outlook for Germany’s second-largest utility.
RWE is marketing notes maturing April 2075, according to a person familiar with the matter, who asked not to be identified because he’s not authorized to speak about it. S&P cut its outlook on RWE’s credit rating to negative from stable last week, citing persistently low power prices in the company’s main markets.
Hybrid bonds are popular with borrowers trying to preserve their credit grades because ratings firms count 50 percent of the bonds as equity, reducing their assessment of an issuer’s indebtedness. Investors like them because the European Central Bank’s asset purchase program is suppressing rates, fueling record sales of 15.3 billion euros ($16.2 billion).
“Because of the deterioration in its credit case, RWE really needs hybrids,” said Haroon Hassan, a London-based analyst at Mitsubishi UFJ Securities International Plc. “For a utility, its rating is low and under pressure. I’m not sure these bonds are the best investment, but the sale will almost definitely do well because investors are so yield-hungry.”