On 30 November 2022, EDF launched a Euro-denominated 1 billion hybrid note offering, with a 7.5% coupon and a 6 – year first call date.
The Company can redeem the hybrid note for cash at any time during the 90 days before the first interest reset date, which is expected to be in six years and on every coupon payment date thereafter. Although the proposed hybrid note are perpetual, they can be called at any time for withholding tax, tax deductibility, tax gross-up, rating methodology, accounting, or clean-up call event, or through the exercise of the make-whole call.
The amount of New Notes issued has been calibrated so that EDF’s aggregate outstanding nominal amount of hybrid capital does not decrease by more than 10% after redemption of the USD Hybrid Notes (1) and the Company remains committed to raising financing through hybrid capital securities as a permanent component of its capital structure.
This issue was recorded in equity upon reception of the proceeds, at the total net value of €994 million.
EDF exercised its option to redeem on 29 January 2023 all of the USD Hybrid Notes, which are admitted to trading on the regulated market of the Luxembourg Stock Exchange. If the Company proceeds with the redemption, the holders of the USD Hybrid Notes will be formally notified of such redemption according to the Terms and Conditions of the USD Hybrid Notes.
OCEANE bonds, which are convertible by remittal of a fixed number of shares in exchange for a fixed amount of cash (the “fixed-for-fixed” rule) give rise to recognition of a debt component and an equity component, in accordance with IAS 32.
The debt-equity proportions remain constant even if there is a change in the likelihood that the conversion option will be exercised.
The debt component is measured by the discounted future cash flows method using a discount rate applicable to a comparable market bond with no conversion option. The equity component corresponds to the difference between the fair value of the bond and the fair value of the debt component.
Issue expenses are allocated between the debt and equity components in the same proportions as the initial allocation.
On 8 September 2020, EDF made an issuance of Green Bonds convertible into new shares and/or exchangeable for existing shares (OCEANEs Vertes) with the nominal amount of €2,400 million and an issue value of €2,569 million.
In accordance with the terms of the OCEANE bonds, a consequence of the Simplified Tender Offer initiated by the French government (see note 2) was that if the offer was declared compliant by the AMF, the opening of the Offer would lead to temporary adjustment of the EDF share allocation ratio for conversion of the bonds during the defined Tender Offer Adjustment Period.
The bondholders were thus formally notified on 23 November 2022 that the new share allocation ratio (NRAA – nouveau ratio d’attribution d’actions) would be 1.289 EDF shares for one OCEANE bond from 24 November 2022.
At 31 December 2022, 882,340 OCEANE bonds had been converted into new shares (during the period 24 November-31 December 2022), giving rise to creation of 1,137,336 shares.
These operations increased the share capital by €0.57 million since exchange for new shares was the only option. They generated a bond/share conversion premium of €9.08 million (see note 14.1).
For information, the French government acquired 127,147,355 bonds (OCEANEs) through this Simplified Tender Offer, with the result that it held 214,979,011 OCEANE bonds or 98.30% of the total portfolio of OCEANEs at 31 December 2022.
On 8 February 2023, the AMF published the result of the French government’s simplified tender offer for the equity securities of EDF, after the offer closed on 3 February 2023 (see notes 2 and 14.1). Consequently, in accordance with paragraph 2.6.3 (public offerings) of the terms of the offer, the share allocation ratio adjustment period in the event of a tender offer will expire on 1 March 2023, i.e. 15 business days after the AMF’s publication of the result of the Offer. After the adjustment period in the event of a tender offer, the share allocation ratio will be adjusted to 1.124 shares per OCEANE bond, the same as the share allocation ratio that applied before the adjustment period in the event of a tender offer. Due to the French government’s undertakings pending the Paris Court of Appeal ruling on the action seeking annulment of the AMF’s approval of the Offer, if the Court confirms the AMF’s approval and the Offer is reopened, the share allocation ratio will be adjusted again, to 1.289 shares per OCEANE bond, respecting a new adjustment period in the event of a tender offer, on terms that will be announced by EDF.
(1) The US$3,000,000,000 Reset Perpetual Subordinated Notes of which US$2,097,614,000 is currently outstanding.
