Hrvatska elektroprivreda (HEP) determined the final terms of a new issue of bonds denominated in USD on October 19, which were offered to investors in the international capital market.
The new eurobonds amounting to 550 million US dollars will be issued with a yield of 6.125 percent, a coupon of 5.875 percent, and a one-time principal maturity in 2022. The amount raised from the new issue will primarily be used for the repurchase of existing bonds, while the remaining difference (less than 20 percent of the new issue amount) will be used for general business purposes. The preparation for refinancing existing bonds took place through two parallel actions – the process of repurchasing old bonds (which resulted in an exceptionally high repurchase percentage of 83.37 percent) and meetings with investors related to the new issue. The joint arrangers and sponsors of the issue are Banca IMI/PBZ, Morgan Stanley, and Unicredit/Zagrebačka banka.
– The newly issued bonds will result in reduced financing costs given the favorable market conditions characterized by low interest rates. Specifically, the existing issue after the currency swap transaction had a coupon of 6.53 percent, while the new issue will carry a coupon of 4.85 percent with a longer maturity than the previous issue. With the new issue nearly 18 months before the maturity of existing bonds, HEP has avoided the refinancing risk in circumstances where bond debt is treated as short-term debt. Such a business move will have a positive effect on the perception of the company by rating agencies – HEP stated.
Demand for the new issue was nearly 4 times greater than the offered amount, exceeding 2 billion US dollars. HEP has borrowed based on its standalone credit rating (BB-/Standard&Poor’s and Ba2/Moody’s), further confirming that international investors have recognized the strength and potential of HEP.
