| At a glance: Deal type: Casino Guichard-Perrachon €500 million 7.5% perpetual non-call five Arranger: UBS Lead manager: BNP Paribas Date: January 2005 |
French retail group Casino Guichard-Perrachon was the first corporate to obtain significant recognition from the ratings agencies for selling a deeply subordinated debt instrument. The corporate hybrid sector had experienced a false dawn in 2003. Linde and Michelin sold deals then, but these were widely regarded as little more than expensive debt securities, with investors demanding extra spread for being subordinated in the companies’ capital structure. One problem was that the rating agencies’ methodology had not yet evolved to a stage where the subordination was truly valued. Furthermore, the level of compensation investors wanted for the extra risk back in 2003 was much greater than it is now.
The Casino €500 million perpetual was a non-call five with no coupon step-up and was the start of a significant trend that swept across Europe and to the US. After Casino’s deal, corporates could realistically view hybrids as cheap equity rather than an expensive form of debt because the rating agencies – their de facto regulators – are finally recognizing hybrids’ worth.