Bloomberg News

Dong Announces Spread for New Hybrid Bond in S&P-Triggered Swap

June 13, 2013

Dong Energy A/S said a new hybrid security designed to replace a 3010 bond that lost its equity content after a Standard & Poor’s rule change will be offered at 450 basis points over the 10-year euro mid-swap rate.

The swap rate will be determined on June 19, the company said in a statement to the stock exchange today.

Dong said June 10 it will ask holders of its 7.75 percent junior subordinated 700 million euro ($924 million) 3010 hybrid bond to swap into the new security after S&P cut the old bonds equity content to zero from 100 percent. The new bond is a 500 million-euro hybrid, offered at 104 percent of the 3010 hybrid’s face value.

Dong Chief Financial Officer Carsten Krogsgaard Thomsen said this week the swap terms represent a “compromise” after the company struggled to adjust its capital structure to S&P’s new rules. Dong could have called the bond at 101, he said. The utility, which spent months designing the 3010 note to fulfill S&P specifications, says it has been assured the new note will provide it with 50 percent equity, helping restore its loss-absorbing buffers.

Dong is trying to get its capital structure in place as the Danish government prepares to sell an equity stake of at least 6 billion kroner ($1.06 billion) in the company, Krogsgaard Thomsen said this week.

S&P said June 10 it was affirming Dong Energy at BBB+, with a negative outlook, after the company announced its planned bond exchange.

“We believe that the proposed hybrid capital would largely mitigate the negative impact on Dong Energy’s credit measures following our re-evaluation of the equity content in the existing hybrid instrument,” S&P said. “The negative outlook reflects our view that Dong Energy could find it difficult to improve its financial risk profile to a level commensurate with the current rating over the next 12-18 months.”

To contact the reporters on this story: Christian Wienberg in Copenhagen at; Gelu Sulugiuc at

To contact the editor responsible for this story: Tasneem Brogger at

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