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GDF Suez issues euro-denominated 100-yr bond

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  • GDF Suez issues euro-denominated 100-yr bond

FRANCE - French energy group GDF Suez has successfully launched a €300m bond issue with 100-year maturity and 5.95% coupon.

Bank of America Merrill Lynch and JP Morgan jointly managed the issue - the first of its kind denominated in euros ever floated in the market.

A GDF Suez spokesman told IPE that pension funds, particularly those based in the UK, accounted for about 60% of the issue, but did not disclose their identity. 

He added that almost 40 investors subscribed to the 'centenary bonds', which generated an order book totaling close to €400m.

Geert-Jan Troost, an Amsterdam-based investment consultant at Towers Watson, said: "It's unlikely that the centenary bond will ever become a mainstream investment product, but it is nevertheless well-suited to issuers such as GDF Suez, which has long-dated assets such as power stations and plant facilities, which demand long-term financing."

Troost said the fact that pension funds were at the forefront of the issue was to be expected, but he was surprised at the preponderance of those from the UK, given the possible negative effects of cross-currency factors. 

"Clearly, a euro-denominated bond is a smoother fit if you're a euro investor," he said. "For UK investors, there could be a risk of a mismatch in liabilities, so hedging provision is important."

Jeff Tannenbaum, head of European debt syndicate at Bank of America Merrill Lynch, said there was "significant UK money in the transaction" and confirmed that estimates of a total order book in the region of €400m "was not an unrealistic figure".

He added: "There are only a very limited number of companies out there that are comfortable with a 100-year duration issue as a way of raising capital, and the same goes for investors - there are not many that are ready to buy such long-dated bonds. 

"In the case of the GDF Suez issue, the two [issuer and investors] came together in a rather unique fashion, so we shouldn't expect this kind of transaction to come along that often in the future."

Tannenbaum went on to play down the potential cross-currency drawbacks facing UK investors subscribing to euro-denominated bonds.

"They [UK investors] have become much more flexible in their investment habits, perhaps as a result of the reduction in the number of sterling-denominated opportunities open to them, and can call on hedging techniques to offset possible mismatches in liabilities from currency differences," he said.

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