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Will Fresenius End Up In The Bundesbank’s Books?

06 September 2016 by lberuti

On Monday night, FREGR ( Fresenius SE & Co KGaA ), Europe’s biggest publicly traded health-care provider, announced they are buying Spain based privately held hospital group Quironsalud for an estimated €5.76Bln. Despite being predominantly debt funded - FREGR intend to issue bonds with a 10 to 15-year maturity, on which the company expects to pay interest in the region of 2% -, the transaction will use the headroom available under current rating and should not push the company into junk category, a must to count among their debtholders the one with the deepest pockets, the ECB. At the moment, all FREGR’s bonds are among the €100Bln “eligible bonds” - i.e. which comply with the CSPP criteria – that the ECB cannot buy because of technicalities. Indeed, none of them are on the ECB collateral list, which is a prerequisite for the ECB to start buying. We can bet that the newly issued debt will only comprise “New Global Notes”, the required format to be included in the ECB collateral framework. That would certainly help them achieve their interest rate target, which is fairly ambitious for a BBB- company.