(Updates story with final terms)
By Pablo Mayo Cerqueiro
Feb 13 (Reuters) - Germany's Delivery Hero said it raised 1 billion euros ($1.07 billion) through an issue
of convertible debt late on Monday, after wooing investors with
significantly higher interest payments than it has offered in
the past.
Banks on the deal initially marketed the seven-year bond
with an annual coupon as high as 4%, but were able to price the
notes at 3.25% in a sign of strong demand. The conversion
premium was 40%.
The coupon is significantly higher than the international
food delivery company has paid on its recent deals and reflects
a jump in corporate borrowing costs following the fastest
tightening in interest rates by major central banks since the
1980s.
The company is using the funds 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 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%.
Though Delivery Hero is a recurrent issuer of equity-linked
securities, the deal illustrates a trend among listed European
firms turning to convertible bonds for financing as an
alternative to straight-up equity or debt.
At the end of January, German arms manufacturer Rheinmetall raised 1 billion euros 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.
Rheinmetall's bonds, due in 2028 and 2030, pay interest of 1.88%
and 2.25%, respectively.
A beneficiary of the COVID-19 pandemic, Delivery Hero's
shares fell in early 2022 amid darkening economic prospects and
have yet to recover. The stock was down more than 2% on Tuesday
morning from Monday's close.
Last week, the company posted a negative earnings before
interest, tax, depreciation and amortisation (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
have placed 237 million euros worth of existing shares on behalf
of convertible bond investors as a hedging manoeuvre, according
to a bookrunner message seen by Reuters.
($1 = 0.9320 euros)
(Reporting by Pablo Mayo Cerqueiro in London, Editing by Dhara
Ranasinghe, Josie Kao and Sharon Singleton)
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