Merck KgaA  (MRKGR: A3 / A): Hybrid Issuance ?

Merck has issued Hybrids in 2014, 19, 20

• In 2020, it issued EUR 1b vs Tendering 2.625 Call21.
• It has tendered without issuance in 2022 and 2023.
• In 2022, it bought EUR 250m 2.875% Call29 (8.3% of Total Outstanding)
• In 2023, it bought EUR 300m combined of 1.625% Call26 and 2.875% Call29 (10.9% of Balance)

The combined 2024 calls are worth 40.3% of the outstanding balance. S&P prefers that Hybrid redemptions without replacement are kept below 10% per 12-month or 25% over 10yrs.

Merck KgaA has already redeemed 18.3% of the 2021 number without replacement. S&P make allowance for transformational divestments such that a redemption would have no or minimal impact on creditworthiness.

Since the Versum transaction in 2019, Net Debt has fallen from EUR 13.4bn to EUR 8.5bn

Moody’s upgraded Merck KgaA in Oct ’21 to A3. S&P has been stable for 11 years.

So, maybe S&P give them leeway to redeem without issuance but 40% of the outstanding would be a big ask from the borrower.