The banking group, Deutsche Börse AG, had made an announcement on Monday. This announcement was in regards to the successful placement of a corporate hybrid bond worth EUR 600 million. This bond has a 27-year term, with the first call date being possible after seven years. The bond holds a coupon of 1.25% annually for the first call date.
Refinancing To Optimize
The bank had refinanced its outstanding hybrid bond worth EUR 600 million, doing so ahead of the first call date that was upcoming. Through this refinancing, Deutsche Börse stands to gain a significant saving in interest. This new instrument, holding only 1.25% interest, will replace the old bond that held a coupon of 2.75%. The offer itself has managed to attract a lot of demand from investors, and was oversubscribed seven times in total.
S&P Rating Bond A+
This hybrid bond is considered as 50% equity by the S&P rating agency, thus supporting the credit rating of Deutsche Börse. Furthermore, the bond will see to a contribution to its financing capacity, as well. On the 8th of June, 2020, Standard and Poor’s had assigned its long-term issue rating of “A+” to Deutsche Börse AG’s proposed subordinated hybrid notes.
The rating firm explained that the A+ rating was given to the proposed notes due to its notching down from the “AA” group credit profile, or GCP. This two-notch differential stands as a reflection of the methodology of S&P when it comes to rating hybrid capital.
Under S&P, it deducts one notch for payment flexibility, as it reflects that the deferral of interest in these notes is optional. The second notch is removed due to subordination, as Deutsche Börse is an investment-grade institution, which is to say it’s higher graded than BB+.
The World Keeps Turning
This new hybrid bond will be listed within the Frankfurt Stock Exchange’s Regulated Market. Alongside this, it will be listed within the Luxembourg Stock Exchange, as well.
Alongside this new issue, aiming to further optimize the cost base, the banking firm had made another announcement. Deutsche Börse revealed that there is a tender offer to repurchase early within the outstanding EUR 600 million hybrid bond, as well.
For the most part, the financial industry has started to steadily climb back out of the ditch it was during the early havoc that the COVID-19 pandemic had wreaked. With any luck, this can continue, and the financial world can start to grow again.