Australian Grid Firm Debuts in Europe’s Hot Hybrid Bond Market

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An Australian energy supply company is adding to the highest pace of hybrid bond issuance in Europe in more than a decade.

AusNet Services Holdings Pty Ltd is offering at least 500 million euros ($601 million) of 60-year subordinated notes, according to a person familiar with the matter, who isn’t authorized to speak publicly and asked not to be identified. It will be the company’s first hybrid in the currency following similar deals in Australian, Singapore and U.S. dollars, based on data compiled by Bloomberg.

The upcoming deal will boost the frenetic pace of corporate hybrid bond issuance, which already amounts to almost 10 billion euros -- or twice the total issued in this period last year, based on data compiled by Bloomberg.

Australian Grid Firm Debuts in Europe’s Hot Hybrid Bond Market

“Most of the issuers don’t have any imminent funding needs so they are issuing hybrids to protect their rating,” said Andrea Seminara, chief executive officer of Redhedge Asset Management. “They are doing so right now given the tight spread level and the absolute yield demand from investors”

Analysts at Scope Ratings AG recently called for another active year of hybrid bond supply, given an “increasing vigilance” toward preserving credit ratings due to the uncertainty over when earnings will recover to pre-pandemic levels. Hybrid bonds tend to pad up a balance sheet as they are partly recognized as equity by rating companies.

Representatives at AusNet didn’t immediately respond to a request for comment.

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