(Bloomberg) -- Satellite communications company SES SA sold two new hybrid bonds on Thursday to fund its acquisition of Intelsat SA, adding to a resurgence in offerings of the securities.
The company raised €1 billion ($1.1 billion), with both bonds maturing in 30 years and with first call dates of September 2029 and June 2032, according to a person familiar with the matter who asked not to be identified. The deals pulled in more than €3.2 billion of investor orders and carries yields of 5.625% and 6%, the person said.
The proceeds of the sale will be used to finance the purchase of Intelsat as well as to refinance existing indebtedness and for general corporate purposes, a spokesperson for SES said by email.
The deal is part of a revival for the hybrid bond market, which has seen slow issuance in recent years as high costs kept borrowers away from the product. The SES offering was the fourth issue within three weeks, after no new deals since early July, according to data compiled by Bloomberg.
One driver behind the flurry of sales: The yield premium for euro non-financial corporate hybrid bonds over senior debt has narrowed to around the tightest since early 2022, according to ICE Bank of America indexes data.
Hybrid bonds are typically the most expensive form of debt for non-financial companies, but borrowers like them because rating agencies partly recognize them as equity, easing the impact on their balance sheets. While it’s appealing for borrowers to lock in this form of debt at tighter levels to their senior bonds, investors also are buying them in droves.
Deals from Snam SpA, Accor SA and Merck KGaA in the past three weeks have attracted bumper investor demand, with deals ending as much as 4.9 times covered by orders, according to data compiled by Bloomberg.
“The levels of spreads still matter less than the absolute yield level for now,” said Marc Lacraz, credit fund manager at Edmond de Rothschild Holding SA, who focuses on corporate hybrids. “While we don’t expect them to tighten a lot further we see little reason for them to widen meaningfully in coming months.”
SES’s deal was managed by Deutsche Bank AG and Morgan Stanley as global coordinators along with book runners BNP Paribas SA, Citigroup Inc., HSBC Holdings Plc and SMBC.
The company had previously taken out a €3 billion equivalent acquisition financing package including €2.1 billion bridge facility and $1 billion bank term loan facility, and said that the deal would be financed from existing cash and equivalents as well as the issuance of new debt, including hybrid bonds.
(Updates with final bond pricing details in the second paragraph)
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