Aryzta, the frozen goods specialist, will repay the outstanding nominal value of 325.4 million francs for its 2013-issued bond (ISIN 20004481) on October 25. The company has officially informed bondholders, according to a statement released Monday morning. The repayment will be funded through available liquidity and proceeds from a credit facility secured in August 2024.

This bond is not an ordinary bond but a corporate hybrid, a deeply subordinated instrument in the capital structure. Interest payments on such bonds can be deferred or suspended, making them more expensive for the issuer compared to traditional bonds, yet cheaper than equity. Corporate hybrids typically lack a maturity date but can be called by the issuer at certain intervals, as Aryzta is now doing. These corporate hybrids differ from bank hybrids in several ways, as the latter are influenced by regulatory requirements.

A painful end for Hochdorf bondholders

Aryzta has faced challenging times in recent years, as reflected in the bond’s trading history, with prices dropping below 60 percent at points in 2020.

Corporate hybrids have returned to the spotlight in recent weeks, particularly due to Lucerne-based dairy processor Hochdorf, which filed for provisional debt restructuring, as reported by finews.ch. An extraordinary general meeting on Wednesday will determine whether Hochdorf’s subsidiary, Swiss Nutrition, and its operational business will be sold to a financial investor. It is already clear that Hochdorf’s hybrid bondholders are likely to face significant losses on their 125 million francs investment.

A niche market continues to shrink

Corporate hybrids have always been a specialized product in the Swiss market, and this niche has narrowed further in recent years. Currently, only Hochdorf, Aryzta, and energy provider Alpiq have outstanding hybrid bonds. In the past, companies such as Hero, Siegfried, and Valora were also part of this group.

Despite the repayment, Aryzta will remain in this market segment, as it still has another outstanding hybrid bond (ISIN 25359278) issued in 2014, with 144 million francs still outstanding.

In its statement, the company noted that between 2021 and 2024, it had repaid hybrid bonds (including deferred interest and compound interest) totaling 880 million euro, thereby optimizing its balance sheet. These repayments were funded through operational cash flow or bank loans.