EnBW Said to Market Europe’s First Hybrid Bonds Since Juneby
German utility EnBW AG is seeking to sell Europe’s first hybrid bonds since June as the cost of raising funds via the notes hovers near a record low.
The supplier of electricity, gas and water plans to issue bonds in euros, dollars or both, and will begin meetings with investors in Asia and Europe at the end of the week, a spokeswoman for the company said by e-mail.
Issuance of hybrid bonds, which combine elements of debt and equity, is showing signs of revival in the region after economic turmoil and a reclassification of some of the securities by S&P Global Ratings sent sales down 88 percent this year, according to data compiled by Bloomberg. Satellite broadband provider SES SA of Luxembourg and France’s Total SA sold hybrids in the spring as increased central bank stimulus crushed borrowing costs.
“This is the beginning of hopefully a significant set of deals,” said Julian Marks, a London-based portfolio manager at Neuberger Berman, which oversees $250 billion of assets, including more than $1 billion in corporate hybrid funds. “Current levels for corporate hybrids are still highly attractive for investors, relative to the other opportunities out there in European credit right now, so deals should be very well received.”
Average yields on global hybrid bonds are 3.37 percent after falling to a record-low 3.35 percent on Aug. 31, according to Bank of America Merrill Lynch index data.
“Hybrid bonds are a permanent element of our capital structure and market conditions are favorable,” said Julia von Wietersheim, a spokeswoman for the Karlsruhe-based company.
This would be the first sale of a hybrid bond in the single currency since satellite operator SES SA issued 750 million euros ($836 million) of bonds on June 3, according to data compiled by Bloomberg. The advantage of hybrid debt for borrowers is that ratings companies count part of the bonds as equity, which reduces assessments of indebtedness.
(An earlier version of this story corrected the spelling of Karlsruhe.)