Veolia issues hybrid bonds to buy Engie’s stake in Suez

Posted on Oct 14, 2020 at 9:08 p.m.

Veolia has already started financing the acquisition of Suez, although the latter does not want a forced marriage. On Wednesday, the utilities group placed two new hybrid perpetual bonds on the financial markets for an amount of two billion euros. The first, for 850 million euros, has a maturity of 5.5 years and offers a coupon of 2.25%; the second (1.15 billion euros) has a maturity of 8 years and a coupon of 2.5%.

Debt recognized in equity

The placement has been subscribed three times by the investors. This new debt will be recorded in the group’s balance sheet as equity.

These 2 billion euros will finance part of the 29.9% of the capital of Suez bought back from Engie. For this block, the group led by Antoine Frérot has already disbursed around 3.4 billion euros.

If the group succeeds in subsequently carrying out a takeover bid on the rest of Suez’s securities, it plans to finance the approximately 8 billion euros remaining (if the buyback is made at 18 euros per share) by the proceeds of sales of assets, which were already carried out by Veolia last year, then by additional debt and finally, by a capital increase.

Not the first time

This is not the first time that Veolia has used the hybrid bond market. In January 2013, the group had already issued 1 billion euros and 400 million pounds of hybrid debt, while its high debt threatened its “investment grade” rating. These bonds, which paid high coupons (4.5% for the stock in euros, 4.875% for that in pounds), representing annual financial expenses of around 66 million euros, were repaid in March 2018 .

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