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2 July 2003

The new junk issue yields more than the legacy bonds despite having a higher rating and structural seniority. This is bonkers and should reverse although market inefficiencies may slow the process. This should reverse although market inefficiencies may slow the process.

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HeidelbergCement priced its new junkbond issue at par on Wednedsay to yield 7.375%. The E700m issue, which matures in 2010, was yielding 7.2% in early dealings, a spread of 380 basis points over riskfree government debt.

The new bonds are rated at the highest junk level by Moody's and Standard & Poors. The agencies rate HC's old bonds two notches below this. The new bonds benefit from guarantees from key HC subsidiaries that grant more direct access to cash and assets held by these subsidiaries.

HC's old 2007 bond was yielding 7.17%, a spread over government bonds of 467 basis points. The less liquid old 2009 bond was 7.14%.

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