Lead managers said the size and price of SSE’s planned issue would be decided following the end of a week-long roadshow to meet with investors, but they expect the issue to be launched by the end of the week.
A deal from SSE would be only the second corporate hybrid issue this year, following Dutch utility TenneT’s €1.5bn (£1.2bn) transaction in February.
French utility Suez Environnement is also due to kickstart a roadshow for a hybrid issue tomorrow. The issues would be SSE and Suez debuts in the hybrid market.
“The structure of the SSE deal will be very similar to TenneT,” said Gavin Kirkpatrick, capital structuring and advisory banker at Royal Bank of Scotland, who was a structuring adviser on both the TenneT and SSE hybrids.
While TenneT had dual-call dates at 7- and 12-years, the SSE issue will have 5- and 10-year call dates, he said.
Companies can use hybrids, which are a blend of debt and equity, to raise capital more quickly than a rights issue. They also have the key benefit of not diluting shareholders, like traditional equity capital. The riskier nature of hybrids, mainly that the issuer will not redeem the debt at the stated call dates, means investors demand a higher return than senior bonds.