What impact of EC’s amended framework on State aids on corporate hybrids?
EC’s recently amended framework on State aid measures in the context of Covid-19 outbreak bears implications for corporate hybrids through a ban on coupon payment but also (in our view) on principal redemptions . A thorough review of our sectoral coverage universe ( Aviation, Hospitality, Mining, Oil & Gas, Real estate, Retail, TMT, Utilities ) reveals the only risk of coupon deferral/principal extension in relation to State support scheme s lies in the Lufthansa c.21 hybrid instrument. For Lufthansa hybrid , our central scenario is for coupon payment and principal redemption to be deferred until February 2026 ( i.e. 2 nd call date) . Such scenario makes the current cash price (72%) attractive, this despite remaining uncertainties on the support scheme being approved by Lufthansa shareholders.
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