Yesterday, UBM announced the intention to repay the outstanding € 52.9m of its 2018 hybrid bond prematurely after five years on March 1^st 2023. The repayment marks an important step on UBM’s debt management agenda. In fact, the hybrid bond had a “Reset Date” on March 1^st 2023 at which the fixed interest rate of 5.5% would have been increased by 5% to 10.5%.

Considering the outstanding principal of € 52.9m, UBM would have incurred additional interest costs of € 2.6m per annum (4% of 2023e EBT). In turn, the premature repayment will reduce UBM’s future annual interest costs by a further € 2.9m. As the repayment will take place on March 1^st, we are not yet reflecting this in our model.

Although the repayment was made entirely from existing liquidity, UBM’s balance sheet metrics continue to be strong. The equity ratio remains within the communicated target range of 30-35%. Moreover, we estimate the company’s cash position to still be in the range of € 250-280m (eNuW; vs € 358m at 9M 22), leaving sufficient room for possible project acquisitions.

The remaining refinancing wall in 2023 amounts to € 279m (€ 120m bond & € 169m project financing). We hence expect the company to issue at least one new bond by Q3 23e the latest (eNuW € 150m). Taking into account the recent interest rate hikes, UBM’s average cost of debt is seen to increase to c. 4.0% in FY 2023e (2.9% at 9M 22). As the company intends to focus on sustainability linked financing going forward, the issuance of a green bond is likely. In fact, UBM already issued two sustainability linked financing instruments in 2021 for a total of € 250m. In UBM’s case, a green bond indicates that bondholders receive a 10bp premium on the redemption amount at maturity for every year in which the company’s ESG ratings fail to meet certain thresholds.

Overall, UBM looks well equipped to cope with the refinancing topic, in our view. We continue to have high confidence in the case, as the company is not only financially healthy but also focused on the megatrends of the industry – smart and sustainable buildings.

Reiterate BUY with an unchanged PT of € 39.00 based on DDM.