Eggborough Power Station‘s 7% ’22 bonds soared 15 points to 335 as investors seek to buy the securities, which have an embedded call option that allows holders to buy the east Yorkshire power station in March 2010. Investors seeking the call option have piled into the debt, pushing up trading levels. The notes were trading in the 200-225 range at the beginning of the year, said the analyst
He added that 26 parties have expressed interest in the sale. He said investor interest is high because Eggborough, which belongs to British Energy, is considered a rare asset in the U.K. power market. “There are not many large coal-fired plants like this one,” he said. British Energy bought Eggborough in early 2000 to complement its nuclear power generation business. Investors are buying for the equity upside in the company and not paying much attention to the bonds’ current return.
Investors that have submitted bids include hedge funds and private equity firms, said the analyst. He added that investors outside of the U.K. have expressed interest, but declined to comment on specific bidders. The bonds have a face value of £134 million. A spokesman for British Energy said the sale is speculation and declined to comment.