DEAL: Volcan Investments’ mandatory exchangeable bonds

Author: Amélie Labbé | Published: 13 Nov 2017

Volcan Investments has funded its purchase of a 19.35% in stake in mining giant Anglo American via the issuance of two three-years mandatory exchange bonds. The transaction is a first in Europe.

The landmark structure, which now makes Volcan one of the largest shareholders in Anglo American, relies on the sale of a combined £3.5 billion ($4.6 billion) of secured limited recourse mandatorily exchangeable bonds over two separate transactions. It is also known as a purchase of equity via mandatory securities (POEMS) transaction, though this is sole bookrunner JP Morgan’s own label for this product.

The structure is believed to have been used only once before in the US, but using derivatives instead of bonds.

An initial £2 billion was raised via the issuance of 3.875% notes in March, while the second sale, on October 10, comprised £1.5 billion of 4.125% notes.