VINCI's €150M Tap Issue: Navigating Non-Dilutive Financing in a Volatile Market

VINCI, the French infrastructure giant, has announced a tap issue of up to €150 million in non-dilutive convertible bonds, fully assimilated to its existing €400 million convertible bonds due February 2030. This move underscores VINCI’s strategic focus on low-cost financing while safeguarding its equity structure—a critical advantage in its capital-intensive sector. But how does the final price of this tap issue get determined, and what implications does it hold for investors?

The Mechanics of the Tap Issue

The tap issue mirrors the terms of VINCI’s original €400 million convertible bonds, issued in February 2025. Here’s the breakdown of its key features:

1. Coupon Rate and Cost of Capital

The bonds carry an annual coupon rate of 0.70%, paid semi-annually—a remarkably low rate reflecting VINCI’s A-/A3 credit rating and investor confidence. This rate is consistent with the original issue, ensuring fungibility between the two tranches. For comparison, would highlight its pricing advantage.

2. Conversion Terms: The 20% Premium Mechanism

The non-dilutive structure hinges on a 20% premium over VINCI’s share price average during a specified reference period. For the original issue, this average was calculated over 5 trading days, yielding a conversion price of €130.1281.

For the tap issue, the reference period is shorter—2 consecutive days (April 29–30, 2025)—with the final conversion price set at 120% of the average share price during this window. Investors should monitor to gauge the tap’s conversion price.

3. Cash Settlement: No Dilution, No New Shares

Unlike traditional convertibles, VINCI’s bonds do not issue new shares upon conversion. Instead, the company settles conversions via cash-settled call options purchased from banks. This ensures equity stability, a crucial factor for VINCI’s long-term projects, such as its €1.2 billion expansion of the Paris-Orly Airport.

4. Fungibility and Liquidity

The tap bonds are fungible with the original issue, trading on the same Euronext listing. This alignment maintains liquidity and pricing consistency, reducing fragmentation risks for investors.

5. Risk Mitigation: The 60-Day Lock-Up

VINCI’s 60-day lock-up clause, effective from May 6, 2025, prohibits new equity issuances, further shielding shareholders from dilution. This aligns with its €550 million total issuance (original + tap) for general corporate purposes, including debt refinancing and growth projects.

Key Considerations for Investors

• Conversion Premium Sensitivity: A higher share price during the reference period boosts the conversion price, favoring bondholders. Conversely, weaker stock performance could reduce the premium.
• Hedging Dynamics: Banks acting as counterparties may buy/sell VINCI shares during the reference period to hedge their positions, potentially influencing short-term price volatility.
• Regulatory Constraints: The offering is restricted to institutional investors outside the U.S., Canada, and other regions, limiting retail access and ensuring compliance with MiFID II.

Conclusion: A Strategic Win for VINCI

The tap issue’s final price hinges on VINCI’s share price during April 29–30, 2025. Assuming the arithmetic average of those two days matches the original issue’s reference period performance (€108.4401), the tap’s conversion price would be €129.77 (120% of €108.14). Even in a volatile market, the 0.70% coupon and non-dilutive structure offer investors a compelling risk-reward profile.

For VINCI, this structure delivers €550 million in low-cost capital while maintaining equity integrity—a vital edge in its competitive sector. With its A-/A3 rating and €63 billion in 2023 revenue, VINCI is well-positioned to capitalize on global infrastructure demand, making this tap issue a shrewd move for both the company and institutional investors seeking steady returns without equity dilution.

further underscores its financial discipline, reinforcing the tap’s attractiveness in a market seeking stability amid uncertainty.