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TMI 186 - June 2010

Hybrid Innovation at TenneT

Otto Jager, Group Treasurer, TenneT

Categories: Accounting, Cash Management, Compliance, Corporate Finance, Debt, Legal, Mergers & Acquisitions, Project Finance, Risk Management, Strategic Treasury, Tax, Other, Regulatory, Economy, Ratings

TenneT decided to acquire Transpower, a high voltage business which had previously belonged to E.ON, and for which the asking price was EUR885m. However, borrowing the full amount in the capital markets would have lowered the company’s A-range credit rating. After discussions with the State of the Netherlands, the owner of TenneT, the firm entered into a special arrangement with the Dutch government to secure an equity contribution, and also issued a hybrid bond, which was heavily oversubscribed. The author summarises the rationale for hybrid debt and provides advice to other corporate who contemplate issuing a hybrid bond.

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