Stakeholders to benefit from sale of stakes to Danske Bank; bondholders to lose out
The largest Danish company, AP Moeller – Maersk A/S (AMKBY), is preparing to provide a record return of $6.5 billion to its shareholders in April, mainly due to selling stakes in Danske Bank A/S. However, the corporate bondholders of the company will lose out.
According to a statement, the company has decided to sell its 20% stakes in a local Danske Bank, which will boost dividend payout for shareholders by $5.5 billion next month. Furthermore, it will pay ordinary dividend of roughly $1 billion from its operations.
“Maersk will no longer benefit from the financial flexibility related to the Danske Bank stake,” Moody’s Senior VP Marie Fischer-Sabatie said in a statement a day after Maersk published its earnings report on 25th Feb. “The 20 percent stake in Danske Bank was indeed an asset of a large value, which Maersk had the possibility to monetize in case of need.”
Credit Rating Unchanged
Standard Poor’s (S&P) said that the flexibility of Maersk would reduce after the sale of the stakes, as it offers the company “somewhat less headroom within the rating”. Divestment of assets by Maersk will not result in any changes in its rating, as per S&P and Moody’s statements. Sale of the stakes would reduce Maersk source of income.
The logistics giant was once the largest corporate bond (unrated) issue in Europe. It asks credit rating assistance service from the two rating companies in September 2013 for its component and received “Baa1” rating grade at Moody’s and “BBB+” grade at S&P.
Since 2013, the bondholder has received return of around 5.5% on corporate bond maturing in November 2017. Over the same period, shareholders have realized 51% return, which includes reinvested dividends.
Up till now in 2015, the company has provided 0.52% return to the bondholders and 23% to the shareholders.
PFA A/S has stakes in Maersk’s equity worth around $375 million, but it hasn’t spent in the bonds of Maersk, as Maersk provides more return to its shareholders compared to its bondholders.
Danske Market Inc., a US brokerage and affiliate of Danske Bank, provided a recommendation against buying the bonds of Maersk, after the company announced its financial results of 2014, due to company’s friendliness towards the shareholders in form of healthy dividends, share buybacks, and risk of debt rising on acquisitions.
Last year, Maersk repurchased share worth $1 billion for the first time by raising $3.2 billion from the sale of stakes in supermarkets.
However, the Danish multinational intends to issue more corporate bonds.
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