Azernews.Az

By Bloomberg

Total SA, Europe’s biggest refiner, and Danish phone company TDC A/S are marketing hybrid bonds as companies take advantage of record-low costs and investor appetite for risky securities.

Total is selling 5 billion euros ($5.7 billion) of the notes combining elements of debt and equity, according to a person familiar with the matter. The average yield investors demand to hold hybrid bonds dropped to an all-time low of 2.82 percent last week and is now 2.84 percent, according to Bank of America Merrill Lynch index data.

Hybrid securities are popular with borrowers because ratings firms count 50 percent of the bonds as equity, reducing their assessment of an issuer’s indebtedness and protecting credit grades. Investors are also seeking higher yields as European Central Bank measures to revive the economy suppress rates.

“A wide range of companies want hybrids for acquisitions or just to shore up their balance sheet,” said Haroon Hassan, an analyst at Mitsubishi UFJ Securities International Plc in London. “Hybrids offer fund managers a way to increase yield in names that they’re already comfortable investing in.”

Companies raised a record 28 billion euros of the securities last year, data compiled by Bloomberg show.

Total is selling 2.5 billion euros of perpetual euro notes that it can buy back in six years, yielding 2.25 percent, according to the person. The Paris-based company is issuing the same amount of undated notes it can redeem in 10 years, yielding 2.625 percent, said the person, who asked not to be identified because they’re not authorized to speak about it.

That compares with the company’s 300 million euros of 4.7 percent notes maturing June 2017, which yield 0.16 percent, and its 2.125 percent securities due November 2021 yielding 0.66 percent, data compiled by Bloomberg show.

TDC is marketing notes that mature in 1,000 years and can be called in six years, to pay 3.625 percent to 3.75 percent, another person said. The company’s Chief Financial Officer Pernille Erebjerg said in October Copenhagen-based TDC would sell bonds to fund its 13.8 billion Norwegian-krone ($1.83 billion) acquisition of Norway Cable Provider Get AS.