Deutsche Post DHL today issued €2 billion worth of bonds to double funds for employee pensionsand to improve its financial results at the same time.
The company said it had taken advantage of the favorable capital-market conditions currentlyavailable to companies with a strong credit quality to obtain long-term funding for a furtherportion of its pension obligations. The volume of the individual issues and the exact conditionswould be based on market conditions.
DP DHL said it successfully placed a convertible bond with a volume of up to €1 billion and aseven-year term. The bond’s initial conversion price was fixed at €20.74, which corresponded to aconversion premium of 30% on the basis of the volume-weighted average price of €15.96 for theDeutsche Post share in XETRA trading during today’s book-building process. The bond can be redeemedby Deutsche Post DHL no earlier than five years after issuance.
In addition, the company issued two conventional bonds with terms of eight years and 12 years,respectively. The two bonds were worth €300 million and €700 million respectively.
Explaining the move, DP DHL said the capital raised “will be used to almost double the planassets available for the pensions paid to German employees”, which are currently about €2billion.
In addition, the company expects the step to improve its operating cash flow in coming yearsbecause a larger share of pension payments can be made from plan assets as well as from the returnsgenerated by the investment of these funds. A small positive effect on the group’s financial resultand its net income is expected, as well.
“We are very pleased with the results of today’s placement,” said Deutsche Post DHL CFO LarryRosen. “We view the strong demand and the attractive terms as a renewed indication of the highstanding enjoyed by Deutsche Post DHL as an issuer on international capital markets and at the sametime as recognition for the sustained successful business performance of the Group.” 
He added: “This step makes sense in several ways: we expect a positive effect on our earningsand an improvement in our cash flow. At the same time, our employees benefit from the additionalsecurity of knowing that the financing of their pensions has been separated from the company’sbusiness performance.”
The company currently has a Moody’s credit rating of Baa1. The outlook on the Moody’s rating wasraised to “positive” at the end of September as a result of Deutsche Post DHL’s continuedsuccessful business performance and improvement in key credit metrics. In mid-November, FitchRatings issued the Group a BBB+ rating with a stable outlook as a result of the company’s financialstability and the exceptional position its four divisions maintain in the global logistics businessas well as in the German mail and parcel market, the company said.
