Hedge funds have been encouraged by Goldman Sachs Group to bet on Germany being able to pull off an increasingly difficult €22bn takeover of the country’s biggest power grid, according to a report by Bloomberg.
The report cites unnamed sources with knowledge for the matter as revealing that in the past few weeks, Goldman has been tempting hedge fund to buy bonds issued by state-owned Dutch grid operator Tennet Holding BV at a price in the mid-80s, by highlighting that Tennet’s bond documentation indicates the securities might be redeemed at 100 if a transaction goes through.
In a sales note this month, Goldman wrote: “Once the deal is announced, the Tennet bond-complex could be one of the largest rate-of-return situations in Europe”. Several of Tennet’s bonds have language around “issuer substitution” that may trigger a change of control and repayment at their full value, according to the note.
Germany and the Dutch government have been in talks over a purchase of Tennet’s local grid for nearly a year now, and while a deal has been agreed in principle, the deepening German debt crisis, coupled with uncertainty surrounding this week’s Dutch federal elections, has made the final negotiations more fraught, Bloomberg’s sources believe its now unlikely that any deal will be reached this year.
