HeidelbergCement: Still mulling hybrid, but equity cheaper

HeidelbergCement: Still mulling hybrid, but equity cheaper
Published: 19 November 2007

HeidelbergCement AG is still considering selling a hybrid bond to help fund its acquisition of U.K.-based Hanson, but the issue will not come to market this year, a spokeswoman for the company said Friday.  
 
"The hybrid bond is not canceled. It is still being considered," she said. "Equity is cheaper for us at the moment, but we are keeping our all our options open."  
 
The hybrid bond was expected to total EUR2bn.  
 
Earlier this month, the company announced plans to raise EUR500m in a capital increase during the first quarter of 2008.  
 
Investors view hybrids as deeply subordinated debt and they are treated as quasi-equity by the ratings agencies, providing a buffer for the issuer’s credit rating.  
 
Subordinated debt is usually hardest hit during periods of weakness when investors become focused on avoiding risk. If things go wrong, holders of a company’s subordinated debt can expect lower rates of recovery than senior debt holders. 
 
Austrian steel company  Voestalpine AG is the only European company to sell a hybrid bond since before the summer when mounting defaults on subprime mortgages in the U.S. saw a number of issuers abandon plans for bond sales as investors grew wary.  
 
HeidelbergCement, which produces cement and other building materials and chemicals, bought rival Hanson in August for GBP7.7 billion