When Dong went wrong

11 June 2013 By Neil Unmack Follow @unmack1

Investors are smarting after Dong Energy said it would redeem a hybrid bond below its market price because S&P decided the security was no longer equity. The episode has cost Dong too – and it faces punishment when it sells its next hybrid. This immature market has growing pains.

This content is for Subscribers only

Context News

Dong Energy said on June 10 it would allow investors to exchange their existing holdings of a 700 million euro hybrid bond for new securities at 104 percent of par.
The announcement follows Standard & Poor’s change to its methodology for rating hybrid securities, which meant the bonds no longer qualified as “high equity” hybrid capital. The new bonds will qualify for a separate treatment by S&P, which means they are viewed as half debt and half equity.
Dong said it intends to exercise a call option allowing it to redeem the bonds that are not exchanged at 101 percent of par. The securities had been trading as high as 111 percent of par shortly before the announcement.

Email a friend

Please complete the form below.

Required fields *