FMC公司进入混合市场的新举措

Restricted - External Fundamental Credit ResearchSamantha Kost+1 212 526 4007samantha.kost@barclays.comBCI, USUS Credit StrategyBradford Elliott, CFA+1 212 526 6704bradford.elliott@barclays.comBCI, US in Latin America, and prove that its new product entrants and low-cost, high-volume salesstrategy canoffsetprice declines and market share challenges from competing generics.Why a hybrid makes sense•Enhances maturity runway and reduces net leverage.Of the $750mn issuance, $500mnwill be used to redeem the 5.15% 05/2026 notes and the remainder will be used for generalcorporate purposes, including the repayment of debt. We assume that the remainder willsupport commercial paper paydown given the $694.8mn outstanding at 1Q25, thuswe allocate all $750mn hybrid use of proceeds (UOP) to debt reduction in Figure 1. In thehybrid-adjusted net leverage calculation, we assign the $750mn new issuance as only$375mn in gross debt because of the 50% debt/50%equity treatment. As a result, netleverage is expected to decline by almost half a turn of leverage, from 3.3x to 2.9x, in 2025.This year-over-year leverage improvement is ahead of management's prior guidance for year-end 2025 leverage that is flat with YE24 levels.FIGURE 1. Implied leverage improvement with 50% debt treatment to reflect agency treatment ofhybrids($mns)YE25EHybrid IssuanceHybrid UOPPF YE25E withrating agencytreatmentDebt3704750-7503704Cash677677Net Debt30263026LTM EBITDA909909Gross Leverage4.1x4.1xNet Leverage3.3x3.3xHybrid-adj. gross leverage4.1x3.7xHybrid-adj.net leverage3.3x2.9xThe hybrid-adjusted net leverage ratios calculate the $750mn of hybrid debt issuance as $375mn (or 50%), to reflect therating agency assignment of 50% debt/50% equity treatment to hybrid issuance.Source: Company filings, Barclays Research•Assistance in defending rating downgrades.The rating agencies assign hybrids a favorable50% equity treatment. Issuing hybrid capital instead of senior unsecureds thereby reducesleverage (as calculated by the agencies).•Diversified funding base.Issuing hybrids opens up issuers to other sources of funding: 1)hybrid investors – dedicated funds that invest only in subordinated or junior subordinatedcapital - and 2) high yield investors – hybrids are rated 1-2 notches below senior unsecuredratings, meaning that many hybrids are either in the US high yield index or at leastofferattractive enough yields for traditional high yield investors. FMC's junior subordinated debt israted Ba1/BB/BB, compared with a senior unsecured ratings 1-2 notches higher, at Baa3/BBB-/BBB-.Relative value for hybridsBack in December, CVS issued its first dual-tranche hybrid, making it the first healthcarecompany to enter the hybrid market for quite some time. At the time, there was muchspeculation about other inaugural issuers, outside of the traditional utility, midstream, andinsurance sectors, that could issue hybrids and expand the issuer base for corporate hybrids.Based on our conversations, the hybrid market would welcome another issuer from a "non- 2 1BRASKM isssued a private placement deal in 2020 and Hercules issued one in 2004.traditional" sector. FMC is one of the only chemicals company to have ever issued a juniorsubordinated hybrid.1In addition, the FMC structure has the highest coupon of any non-perpetual hybrid issued sinceSeptember 2023, and it has a coupon floor, a feature that has drawn significant interest frominvestors over the past year. In fact, structures with coupon floors have totaled $10.3bn year-to-date, already surpassing last year's $7.8bn volume (Figure 2).FIGURE 2. Hybrid supply with coupon floors by yearSource: Bloomberg, Barclays ResearchThat said, being the only hybrid in the chemicals sector has its disadvantages due to a dearth ofcomparables. Therefore, we choose to comp this based on structure. We limit our subset ofhybrid comparables to high yield-rated 30nc5 structures with coupon floors. This leaves us withPCG, CVS, RCICN, and BCECN, all of which have issued in the past year. We also include APTV6.875s of 2055, which have a non-floored structure based on senior spread (APTV 5.75s of 2054are 186bp g-spread). As shown in Figure 3, based on the hybrid-senior spread basis, the newFMC 8.45s trade roughly 70bp back of the average across all of these structures. While based onratio they look slightly rich to comparables, with a 2.5x hybrid/senior ratio versus the 2.7xaverage, we think outright spread basis starts to matter more at wider spread levels. That said,the basis versus senior should trade at a discount to peers given the more cyclical nature of thebusiness (compared with telcos, healthcare, and utilities).Using APTV 6.875s of 2054 as the widest comparable in a cyclical sector, the new FMC hybridtrades 60bp wide based on outright spread, but the basis to senior is equivalent (both ~255bpversus maturity-matched senior bonds). The maindifferencein structure is the coupon floor forthe FMC 8.45s of 2055. Using our hybrid spread model, wh