New
USD 550 m Eurobonds will be issued at 6.125% yield, 5.875% coupon, and the bullet
principal repayment in 2022. Funds collected under the new issue will be
primarily used for the repurchase of existing bonds, while the remaining amount
(less than 20% of the new issue amount) will be used for general business
purposes. The existing bond refinancing preparations were carried out via two
parallel activities – the repurchase of old bonds (resulting in an extremely
high repurchase percentage of 83.37%) and the meetings with investors regarding
the new issue. Joint lead arrangers and underwriters are Banca IMI/PBZ, Morgan
Stanley and Unicredit/Zagrebačka banka.
The new bond issue will result in lower funding cost in view of favourable market conditions with prevailing low interest rates. In particular, the existing issue had a 6.53% coupon following the conducted currency swap, while the new issue will have a 4.85% coupon and longer maturity than the previous one. By issuing new bonds almost 18 months before the maturity of its existing bonds, HEP has avoided the refinancing risk in the circumstances under which the bond related debt is treated as short-term. Such a business move will have a positive effect on the company's perception by rating agencies.