Combining the best of both worlds
Hybrid debt can be a very attractive solution when rebalancing your company’s long-term financing. Especially if you’re unwilling to issue shares or you want to safeguard your rating, while maintaining your borrowing capacity for projects and investments.
Hybrid debt combines characteristics of both equity and debt. It resembles equity on your balance sheet, which in turn has a positive effect on your rating. It also shares equity’s interest-deferral features. As debt, it is non-dilutive of shareholder’s stakes and cheaper to raise than equity. Moreover, its coupon payments, unlike dividend payments, remain tax-deductible as part of expenditure on the balance sheet.
Hybrid debt diversifies your investor base, which increases your financial flexibility. It has become an accepted asset class by institutional investors and has attracted substantial demand on the part of other investors.
BNP Paribas Fortis can structure your hybrid debt solution to achieve an optimum balance between obtaining the desired effect in terms of the rating agencies on the one hand, and investors on the other. We have amassed considerable expertise in hybrid solutions ranging from ‘debt-like’ to ‘equity-like’: zero-coupon convertibles, original-issue-discount convertibles, traditional cash-pay convertibles, trust-originated preferred securities, and mandatory convertibles.