KPN Prices €500 Million Hybrid Bond at 4.625% as Orders Top €2.5 Billion

Royal KPN priced a €500 million perpetual subordinated hybrid bond with a 4.625% coupon on September 1, after investor orders exceeded €2.5 billion. The Dutch telecommunications group said the new securities are non-callable for 5.25 years, with a first call date of September 9, 2031 and a first coupon reset on December 9, 2031.

KPN plans to use the proceeds for general corporate purposes and to refinance existing debt. The company also launched a tender offer for an older €500 million hybrid on the same day, tying the new financing to a broader effort to manage its hybrid capital and lower ongoing interest costs.

Orders exceeded five times the bond’s size

The final order book was more than five times the €500 million issue size, giving KPN a large pool of demand from which to allocate the bonds. KPN described the investor base as broad and diversified. The company did not disclose the number of participating accounts or the final allocation by geography or investor type, so the order-book total should not be read as a measure of how the securities will trade after issuance.

The 4.625% coupon is also below the rate on KPN’s previous €500 million green hybrid issued in June 2024. That security carried a 4.875% coupon until its first reset date in September 2029 and drew a final order book above €1.9 billion. The new bond therefore came with a coupon 25 basis points lower and a larger reported book, although the two offerings were launched more than two years apart and under different market conditions.

KPN expects the new hybrid to be rated BB+ by both S&P and Fitch and plans to list it on Euronext Dublin’s Global Exchange Market. The rating level is below KPN’s current long-term corporate ratings listed on its investor-relations site, where both Fitch and S&P are shown at BBB. Fitch’s outlook is positive and S&P’s is stable, according to KPN.

Tender offer targets KPN’s 2022 hybrid

Alongside the new issuance, KPN offered to repurchase any and all of its €500 million perpetual hybrid capital securities with a first reset date of December 21, 2027, identified by ISIN XS2486270858. The tender is scheduled to expire at 5:00 p.m. CEST on September 8 unless KPN extends it. Acceptance remains subject to conditions described in the tender documentation, including a new-financing condition.

That description matches the €500 million green hybrid KPN issued in September 2022. The older security was priced with a 6.00% coupon until the December 2027 reset date and was first callable in September 2027. Its original order book was close to €3 billion, according to KPN’s 2022 announcement.

Replacing securities carrying a 6.00% coupon with new hybrid capital at 4.625% would reduce the nominal coupon rate by 1.375 percentage points on any amount effectively refinanced on a like-for-like basis. The actual economic benefit will depend on how much of the older hybrid is tendered and accepted, the repurchase price and other financing costs. KPN itself framed the September 1 exercise as a way to manage hybrid capital proactively and optimize ongoing interest costs rather than stating a fixed savings figure.

Investors looking for the formal materials can use KPN’s bond documentation page, which lists a 2026 Hybrid Tender Offer section alongside the company’s other bond and tender materials. The tender process will determine how much of the 2022 security is ultimately retired, so the €500 million face amount of the offer should not be treated as a confirmed repurchase amount before the results are announced.

Hybrid structure keeps partial equity treatment

The new bond is legally perpetual, meaning it does not have a conventional fixed maturity date, but KPN has an issuer call option beginning in September 2031. The 4.625% coupon applies until the first reset date in December 2031. A first call date is not the same as a maturity date, and investors cannot assume that KPN will exercise the call simply because the option becomes available.

For credit-rating purposes, KPN said S&P and Fitch will treat the new securities as 50% equity and 50% debt. KPN also expects to account for the hybrid as equity under IFRS. That treatment is central to why companies use subordinated perpetual hybrids: the financing can raise cash while preserving some equity credit from rating agencies, even though investors receive a bond-like coupon and take greater subordination risk than holders of senior debt.

KPN has used the format repeatedly. Its 2022 green hybrid was also assigned 50% equity treatment by the rating agencies and accounted for as equity under IFRS, while the €500 million green hybrid issued in 2024 had the same 50% equity and 50% debt treatment. The September 2026 deal continues that capital-structure approach, but unlike the 2022 and 2024 green hybrids, KPN described the new proceeds broadly as being for general corporate purposes and refinancing existing indebtedness rather than allocating them under its Green Finance Framework.

Barclays and ING acted as joint structuring advisers on the new hybrid. They also serve as dealer managers for the tender, while Deutsche Bank, Intesa Sanpaolo, Rabobank, Santander and SEB joined them as joint lead managers for the new bond. The next concrete step is the September 8 tender deadline, after which KPN can report how much of the 2022 hybrid was submitted and accepted, subject to the offer terms.