FRANKFURT Oct 9 German potash fertiliser
supplier K+S is looking into hybrid bonds to finance
its C$4.1 billion ($3.97 billion)expansion project in Canada
after uncertainty over potash prices upset its previous funding
K+S has remained committed to its planned investment in the
new Canadian mine, Legacy, even after the breakup of an export
cartel of two larger rivals in July led to expectations of a
slump in prices for the fertiliser mineral.
"Apart from standard fixed-income bonds, hybrid bonds are
also a possibility," a spokesman said on Wednesday, adding that
no decision had been made.
He reiterated previous statements that the main focus of
financing the project was debt, on top of existing cash held and
future cash flows.
In a note to investors issued on Tuesday, Bernstein Research
analyst Jeremy Redenius cited K+S finance chief Burkhard Lohr as
saying that the miner may consider a hybrid bond worth up to
$1.4 billion, secured against its future cash flows.
The K+S spokesman declined to confirm that amount, or
specify what kind of bond it was considering.
Hybrid bond is an umbrella term for a range of debt
instruments with features of equity financing, typically a
convertible bond, which pays a lower coupon than a standard bond
in exchange for the potential to benefit from a rise in the
share price. It may include an option for the issuer to change
the terms depending on the company's financial situation.
Bernstein also cited CFO Lohr as saying he would expect
potash prices to be around $400 per tonne in three years, an
outlook that the company spokesman declined to confirm on
K+S's potash prices tend to follow the bulk purchasing
agreements hammered out between the world's biggest users, China
and India, and the top producers in Canada, Russia and Belarus.
The German producer tends to charge a mark-up on those
prices because it sells fertilisers in smaller lots and many of
its products include additional minerals such as magnesium
Russia's Uralkali, the world's largest potash
producer, in July sent shockwaves through the industry by saying
global potash prices would likely fall to below $300 per tonne
in the second half - from $400 at that time - because of its
decision to leave its export alliance with Belaruskali.
Uralkali has since changed its stance and said it expects
prices to stay above $300, citing robust global demand. This
month it predicted global potash prices would rebound as soon as
supply contracts for top global consumer China are set in early