European FixedReset Bonds

RWE AG, a German utility sold some hybrids:

RWE AG, Germany’s second-biggest utility, sold 1.75 billion euros ($2.3 billion) of hybrid bonds in the biggest offering of the equity-like securities in Europe since 2006.

RWE’s perpetual notes were priced to yield 265 basis points more than the five-year benchmark swap rate, according to a banker involved in the sale. The Essen-based company can redeem the fixed-rate notes in 2015 and 2020. If the notes aren’t called within 10 years, the coupon changes to a floating rate equal to the initial spread plus 100 basis points more than the euro interbank offered rate.

In another Euro deal Scottish and Southern Energy plc issued a big whack of similar instruments:

The Euro Securities will bear interest from (and including) the Issue Date to (but excluding) 1 October 2015 at a rate of 5.025 per cent. per annum, payable annually in arrear on 1 October in each year. The first payment of interest, to be made on 1 October 2011, will be in respect of the period from (and including) the Issue Date to (but excluding) 1 October 2011 and will amount to A51.76 per A1,000 in principal amount of the Euro Securities. Thereafter, unless previously redeemed, the Euro Securities will bear interest from (and including) 1 October 2015 to (but excluding) 1 October 2020 at a rate per annum which shall be 3.150 per cent. above the then prevailing euro 5 year Swap Rate, payable annually in arrear on 1 October in each year. From (and including) 1 October 2020, the Euro Securities will bear interest at a rate reset annually of 4.150 per cent. per annum above the Euro interbank offered rate for 12-month deposits in euro, payable annually in arrear on the Interest Payment Date falling in October in each year, all as more particularly described in ‘‘Terms and Conditions of the Euro Securities — Interest Payments’’.

The Issuer may redeem all, but not some only, of the relevant Securities on the First Call Date, the Second Call Date or any Interest Payment Date thereafter at their principal amount together with any accrued and unpaid interest up to (but excluding) the redemption date and any outstanding Arrears of Interest.

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