Germany's Delivery Hero is offering investors significantly higher interest payments than it has done historically to raise €1 billion through a new seven-year convertible bond.
The company is proposing a coupon as high as 4% – payable semiannually – to secure the funds, with which to redeem an existing convertible bond due in 2024 and pay down another bond due the following year.
The bonds maturing in 2024 and 2025, both issued in 2020, pay a coupon of 0.25% and 0.88%, respectively. The delivery company last priced two convertible bonds in 2021, one with a duration of less than five years and an annual coupon of 1.00% and another due in seven and half years, paying 2.13%.
Investors were told on Monday evening that orders below a 3.25% coupon and 40% conversion premium risked missing out after books were covered within a half hour of launch, according to bookrunner messages seen by Reuters.
The terms reflect a jump in corporate borrowing costs following the fastest tightening in interest rates by major central banks since the 1980s.
Read More: Delivery Hero Reports 2022 GMV Below Expectations
Convertible Bonds
Though Delivery Hero is a recurrent issuer of equity-linked securities, the deal illustrates a trend among listed European firms choosing to refinance debt through convertible bonds as an alternative to straight-up equity or debt.
At the end of January, German arms manufacturer Rheinmetall raised €1 billion in convertible notes to help fund its acquisition of Expal Systems.
However, despite rising interest rates, the industrials firm was able to secure cheaper terms than Delivery Hero, an international food-delivery service. Rheinmetall's bonds, due in 2028 and 2030, pay interest of 1.88% and 2.25%, respectively.
Share Price Fall
A beneficiary of the COVID-19 pandemic, Delivery Hero's shares fell in early 2022 amid darkening economic prospects and has yet to recover.
Last week, the company posted negative EBITDA margin and free cash-flow for the previous quarter, but said it expected to reach free cash-flow break-even by the end of 2023.
Alongside the convertible bond sale, the banks on the deal are placing up to €300 million worth of existing shares on behalf of convertible bond investors as a hedging manoeuvre.
News by Reuters, edited by ESM – your source for the latest technology news. Click subscribe to sign up to ESM: European Supermarket Magazine.
