03/23/2016, 09:40 AM CET

Deutsche Post DHL Group plans further funding of pension obligations

The transaction is expected to improve operating cash flow and have a positive impact on earnings.

 

The Group's headquarters in Bonn/Germany.

  • Issuance of up to EUR 1.25 billion via senior bonds
  • Transaction expected to improve operating cash flow and have a positive impact on earnings
  • CFO Larry Rosen: "We are taking advantage of attractive capital market conditions"

Bonn - Deutsche Post DHL Group, the world's leading mail and logistics group, is taking advantage of the currently favorable capital market conditions. To secure long-term funding for a further share of its pension obligations and for general corporate purposes the Group plans to attract funds of up to EUR 1.25 billion in total. At least EUR 1.0 billion of the capital raised will be used to significantly increase the plan assets available for the pension benefits paid to German employees. The company expects this step to improve its operating cash flow in coming years because a larger share of pension payments can be covered from plan assets as well as from the returns generated by the investment of these funds. Furthermore, the Group expects to see a small positive effect on the Group's financial result and its net income. The Group has already taken advantage of the favorable capital market conditions in 2012, when it obtained funding of EUR 2.0 billion for pension obligations.

"We are very satisfied with the outcome of our 2012 issue. As expected, the returns on plan assets funded by that issue have exceeded the interest costs. Since then, the interest rate has declined even further. With the transaction announced today, we want to take advantage of these attractive capital market conditions," said Larry Rosen, CFO of Deutsche Post DHL Group. "We expect the measure to have a positive effect on our earnings and our cash flow."

The bonds are expected to be placed today. Both the volume of the individual issuances and the exact terms will be based on market conditions.

The company plans to issue two senior bonds with an aggregate volume of EUR 1.25 billion. The transactions will be executed by an international consortium of selected commercial banks of Deutsche Post DHL Group.

Fitch Ratings confirmed the Group's credit rating at "BBB+" with a stable outlook end of November 2015. In March 2016, Moody's Investors Service confirmed the Group's credit rating of "A3" with a stable outlook.