VW sells $2.5bn in a convertible note mega deal

Michael Bow
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EUROPE’S biggest car manufacturer Volkswagen sold one of the largest convertible bonds on record yesterday, tipping the scales at €2.5bn (£2bn).

The firm, which sells Audis and Porsches, lined up three heavyweight banks, Deutsche Bank, Bank of America Merrill Lynch and Credit Suisse, to sell the bond to investors around the globe.

The bond, which will pay 5.5 per cent for three years before converting into non-voting equity ownership, is one of the largest issues on record. It dwarfs others issues this year, including the €750m convertible bond issued by Nokia in October and the €500m issued by Adidas in March.

Deutsche Bank’s head of convertibles Keyvan Zolfaghari told City A.M.: “It is the biggest corporate mandatory ever in Europe and the first traditional mandatory structure in three years.

“It’s really a superb instrument, it’s a very different profile from a traditional convertible bond, it’s very much an equity substitute rather than a debt substitute like most convertibles.”

The VW bond, rated A- by S&P, will convert to equity at a maximum price of €185.40, against a reference price of €154.50 in 2015.

VW, which snapped up 50.1 per cent of Porsche earlier this year, said it was borrowing the money to help it continue to take market share in the car production arena.



Leading the deal for Bank of America Merrill Lynch was Craig Coben, the bank’s head of equity capital markets for Europe, Middle East and Africa. Coben, who worked alongside Yacine Amor and Oliver Holbourn on the deal, has previously led two other major deals this year, the €174m initial public offering of fashion designer Brunello Cucinelli and a €750m convertible bond for telecoms firm Nokia. He has also worked on privatisation deals of over $1bn each in eight European countries in the course of his career, and on over a hundred $250m-plus equity deals in around eighteen countries across EMEA. Coben joined BAML in 2005 and is a major figure in the equity capital market world and widely recognised as one of Europe’s leading bankers. He currently chairs the equity capital markets division of the Association for Financial Markets in Europe. Noted for his keen interest in skiing, Coben sits on the board of governors of Tower Hamlets College in east London and is a trustee of Presence Theatre Company. He graduated from Yale University with a Bachelor of Arts degree and holds a Juris Doctor degree from Harvard Law School. His brother is the best selling crime fiction novelist Harlan Coben, author of the Myron Bolitar series and several other books.