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By Bloomberg

Volkswagen AG and Repsol SA plan to sell hybrid bonds in Europe, the latest companies to issue the securities that allows them to take advantage of record-low borrowing costs while protecting their credit ratings.

Volkswagen, the maker of Golf and Beetle cars, is selling securities due 2022 and 2030, said a person familiar with the matter, who asked not to be identified because they’re not authorized to speak publicly. Repsol, Spain’s largest energy company, is holding a call on Tuesday with investors for a sale, said another person familiar with the arrangements.

The companies are among an increasing number of firms looking to capitalize on investor demand for riskier securities as the European Central Bank’s quantitative easing program drives down yields in the euro area. Air France-KLM hired banks to organize investor meetings for a hybrid sale in the shared currency, a person familiar with the matter said yesterday.

“With yields at record lows, corporate hybrids are an attractive investment compared with other products,” Thibault Colle, a London-based credit strategist at UBS Group AG, said. “Since QE was announced we’ve seen these types of securities rally.”

Officials at Volkswagen weren’t immediately available to comment on the sale when contacted today by phone.

Kristian Rix, an official at Repsol, declined to comment on the bond sale. Repsol Chief Executive Officer Josu Jon Imaz said during an earnings call on Feb. 26 the company would sell hybrid bonds to raise as much as 5 billion euros ($5.3 billion). The company said in December it would use the proceeds of a sale to buy Canadian oil and gas producer Talisman Energy Inc.

Issuer Indebtedness

Hybrid bonds are popular with borrowers because ratings firms count 50 percent of them as equity, reducing their assessment of an issuer’s indebtedness. While the securities pay interest like a bond, they typically have no maturity date and instead have a call date at which issuers may repay the debt.

The average yield investors demand to hold hybrid bonds worldwide dropped to a record 2.67 percent on March 6 and was 2.75 percent yesterday, according to Bank of America Merrill Lynch index data. Companies sold a record 28 billion euros ($29.7 billion) of hybrid bonds in euros last year, data compiled by Bloomberg show.

“For issuers, these types of securities have never been as cheap to issue as they are now,” Colle said. “There’s a clear rationale with issuing these securities; to protect ratings, optimize balance sheet and fund acquisitions in a neutral way.”