Otto Group raises €300m with a hybrid bond

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Expect developments from the Otto Group in the weeks and months to come because they’re in funds after an over-subscribed investment round.

The Otto Group is the retail giant that oversees the Otto marketplaces in Germany and elsewhere and also parent company of the parcel delivery company Hermes, which you’ll already be familiar with. A recent fund-raising round, with an innovative vehicle, means they have 300m EUR to invest and they have some big plans.

Apparently, the Otto Group has successfully placed a so-called hybrid bond. The issue was marketed to large institutional investors such as asset managers, insurers and private banks in Germany and other EU countries. This finance instrument was apparently very well received by investors, with the issue twice oversubscribed. The Otto Group has successfully raised 300 million euros with the bond and will pay a coupon (dividend) of 4% over the next seven years.

The special feature of the hybrid bond is that under IFRS rules it is viewed as equity and therefore strengthens shareholders’ equity in the consolidated financial statement. To achieve this the bond was formally assigned no fixed term, but may be repaid after 7 years.

According to pundits, this particular structure, with a 4% coupon/dividend the Otto Group can offer investors a higher return than with a classic bond. The 1,000-euro denomination also makes the bond suitable for experienced private investors who have been assigned to the corresponding risk category by their bank.

We are delighted at investors’ enthusiastic response to this issue. The very successful placement shows that the Otto Group continues to enjoy an excellent reputation on the capital market.
– Petra Scharner-Wolff, Otto Group Executive Board Member Finance.

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