Volkswagen is dusting off a sexy financing model. The German carmaker’s €2.5-billion ($3.2-billion) mandatory convertible bond is the first from a European corporate since 2009. For issuers looking to protect their credit rating, the route could be more widely followed.
A few months ago, convertible investors in Europe were wondering how long they would have a job. Now the market is back in vogue. Strong sales in September of over €4-billion in Europe saw year-to-date volumes reach €12.2-billion, compared with roughly €8-billion last year, according to Barclays data. Volkswagen shows the market is able to swallow large individual deals too, helped by buoyant demand from the United States. Its €2.5-billion deal attracted orders for more than twice that amount, according to a person familiar with the issue.