Frankfurt, 9 January 2025—Lufthansa Group’s hybrid bond was successfully issued. The group completed the issuance of 500 million euros in subordinated notes on Wednesday. Lufthansa Group is a German Aviation Group headquartered in Frankfurt. Following the meeting on January 7, the company made this huge financial step on the afternoon of Wednesday, January 8. The group speaks of its maturity profile and rating profile, which shows confidence in the capital market.
Profile analysis after Lufthansa Group hybrid bond issuance
The German Aviation Group, Deutsche Lufthansa AG issues an unsecured hybrid bond with a 5.25% interest rate per annum and has a term of 30 years. The first issuer-call date is after 6 years on 15th January 2031. The hybrid bond is a subordinated financing. Subordinated financing is a type of debt that is junior to senior debt, meaning it is behind in repayment order. It ranks behind other more senior obligations of the issuer. The hybrid bond in question is 30NC6 which is senior to other junior obligations.
In 2015, the group issued a hybrid bond (5.125% Hybrid Bond – 2015-2075 – EUR 500m ISIN XS1271836600) which was refinanced as part of Wednesday’s transaction. As a result of refinancing, the repayment is set for the next call date on February 12. 2026. To sum up, the Chief Financial Officer of Deutsche Lufthansa AG alludes that a six-year term following the successfully issued bond also complements the group’s maturity profile. A longer maturity profile means a longer average term of its outstanding debt. The refinancing risk is also reduced with a longer average maturity profile. In addition, a rating profile measures the financial risk of lending in a business to a lender.
Market’s response to the issuance
As per their annual report, the group generated a revenue of EUR 35,442m in the financial year 2023. After the issuance, the offer price for these notes was 100% with a 5.25% yield. Further, the stabilisation coordinator was JP Morgan SE, the news service of the London Stock Exchange declares. Additionally, the stabilisation managers were Citi, HSBC, Crédit Agricole CIB, Morgan Stanley, Société Générale, and Uncredit. To be more precise, stabilisation is a process where the market price of security or in this case bonds is manipulated to ensure a successful issuing. The purpose behind this procedure is prevention against the decline of the price. However, none of the stabilisation coordinators or the managers undertook it following the issuance and it showcases the confidence of the capital market. As a result, the absence of stabilisation suggests a favourable response from the market.
After Lufthansa Group hybrid bond issuance, Dr. Till Streichert, the Chief Financial Officer of Deutsche Lufthansa AG addressed the capital market:
“The successful transaction at the start of the year highlights the confidence of the capital market in our company and reaffirms our broad access to various financing instruments. The favourable market environment combined with strong investor demand enabled us to secure a placement at highly competitive financing terms. With a six-year term until first repayment date, this issuance complements our maturity profile perfectly.”
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