Total Sells 2.5 Billion Euros of Hybrids as OPEC Cuts Oil Output

Total SA sold 2.5 billion euros ($2.8 billion) of hybrid bonds a day after OPEC agreed to cut crude production for the first time in eight years.

The French oil giant issued 1 billion euros of notes that it can buy back in 2023 and 1.5 billion euros of bonds that become callable in 2026, according to data compiled by Bloomberg. The company also sold 1.75 billion euros of hybrids, which combine elements of debt and equity, earlier this year.

OPEC’s decision took markets by surprise and sent energy shares soaring on bets higher oil prices will boost company earnings. Total joins Spanish phone-service provider Telefonica SA and German utility EnBW AG in entering a resurgent hybrid market after European Central Bank stimulus sent borrowing costs on the securities to the lowest in more than a year.

“This could be opportunistic given the decision by OPEC overnight,” said Andrey Kuznetsov, a London-based credit analyst at Hermes Investment Management. “In a strong market environment, companies can issue at a lower cost than in a weaker one.”

Officials at Total weren’t immediately available to comment on the bond sale.

Hybrid notes typically have maturities of more than 30 years and rank behind regular bonds in a company’s capital structure. They offer relatively high yields and borrowers like them because they can count part of the debt as equity, which reduces assessments of indebtedness. 

Average yields on global hybrids fell to 3.7 percent earlier this month, the lowest since April 2015, according to Bank of America Merrill Lynch index data.

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