STRAIGHT EQUITY ISSUERS remained in hibernation this
spring but hybrid capital issuers woke up to inviting
conditions.
Issuers have found that low interest rates, tightening credit
spreads and the continued volatility of the equity market make
hybrid products across the spectrum from subordinated debt
structures to hybrid convertibles highly attractive. Yield-hungry
investors have shown a big appetite for the extra basis points
offered by subordinated debt from credits with which they are
fundamentally happy. And the strong demand for convertibles from
long-starved convertible arbitrage hedge funds has helped issuers
get away with some bargain terms.
Siemens, for example, offered a coupon of just 1% and a premium
of 46% for its e2.5 billion seven-year convertible on May 22. The
issue, managed by Morgan Stanley and UBS Warburg, is the largest
European convertible since Fiat's $2.2 billion exchangeable
offering into General Motors in December 2001.
In April, Munich Re...
