Actionable Ideas for Companies and Sponsors
European Corporates Should Consider Early Refinancing of Upcoming Debt Maturities
With continued uncertainty about rising inflation and higher interest rates, equity investors are focused on how companies address their overall leverage and refinancing of existing debt. Primary equity issuance accounted for 45% of European ECM activity in 2022, the highest percentage since 2010. We expect this trend to continue in the first half of 2023, and the stock price performance of companies that are late to address investors’ concerns over the balance sheet will likely continue to deteriorate. Subject to the size of the potential equity requirement, corporates should consider quick-to-market accelerated bookbuilds or rights issues. Companies can also explore structured solutions that allow an equity placing with upside retention to participate in the future upside of the stock, typically capped at 110%-130%. If there is sufficient balance sheet flexibility, corporates should also consider convertible bonds as a cheaper financing option to refinance upcoming debt maturities.
Source: Dealogic and Jefferies company data