If you’ve been looking to invest for the long-term, this is the asset for you.
Danish energy company Orsted raised 500 million euros overnight via the issue of a hybrid bond which doesn’t expire for 1,000 years.
The offer was heavily oversubscribed, with the company receiving an order book of 2.4 billion euros.
And the funds raised will be used in association with green energy projects, as Orsted transitions away from its traditional fields in oil & gas.
Hybrid bonds are so-named because they include features of both debt and equity.
One type of hybrid bond is known as a perpetual debt security, which has no fixed end-date for the repayment of principal. That gives it the same features as, say, common shares in a company, which don’t mature.
Essentially, Orsted’s 1,000 year hybrid bond has been issued in perpetuity. But according to Bloomberg, most hybrid bonds in Denmark are issued with a set maturity date, for tax reasons.
Evidently, the tax code in Denmark appears to place no limit on the maturity date for hybrid securities, as long as there is one.
So companies typically pick a date in the distant future, which means in practice the debt issue has all the characteristics of a perpetual bond.
While the actual maturity date isn’t until 3017, the first “par call” on the debt is scheduled for 24 November 2024. The par call will give Orsted the opportunity to redeem funds at a value equal to or slightly above the issue price.
Until then, the hybrid bond will have a fixed coupon rate of 2.25%.
Orsted also raised a further 750 million euros through the issue of a 12-year bond, maturing in 2029 with a fixed coupon rate of 1.5%.
The funds will be used in part to refinance an existing hybrid bond the company issued in 2013, which was for 500 million euros with a coupon rate of 4.875%.
According to Bloomberg, Orsted sold its North Sea oil & gas assets earlier this year for more than $US1 billion.
The company is the main utility in Denmark and is the world’s largest developer of off-shore wind farms.