FWD’s IPO: Implications for Bondholders and Early Redemption Risk Assessment

FWD’s initial price offering triggers potential early bond redemption

Earlier this year, we published an update on FWD Group’s credit profile, highlighting the company’s rapid expansion, improving profitability, and positive trajectory toward its planned IPO. At that time, we viewed FWD’s bonds (including the 2029 bonds) as relatively attractive and also highlighted the potential call risk in the event of an IPO.

With FWD’s Hong Kong IPO today, we revisit our recommendations and provide an update for investors. Specifically, the IPO triggers the “Redemption upon an Initial Public Offering” clause embedded in FWD’s 2029 bonds and USD perpetuals.

Trading of FWD's shares commenced on the Hong Kong Stock Exchange on 7 July 2025. Regarding the IPO, management has indicated that a portion of the proceeds will be used to repay existing debt. While precise allocations of IPO proceeds remain at management’s discretion, this intention raises clear questions for bond investors about the likelihood of an early redemptions across affected bonds.

Related article: FWD maintains rapid growth while delivering its first accounting profits

Heightened Early Redemption Risk for FWDGHD 8.400% 05Apr2029 Corp (USD) and USD Perpetuals

The following bonds and perpetual are at risk of an early redemption. However, the conditions differ between the 2029 bond and the perpetual securities.

FWD’s USD Perpetual Securities (namely the 8.045, 8.6245, and 6.675 perp) are callable at par (100) after the IPO, with 30–60 days’ notice. Together, the perps have an outstanding issue size of USD 1,189m. These perpetuals represent a higher interest cost for FWD given the high coupons. Considering the recent decline in US benchmark yields, we think that the management  has economic incentive to early-redeem the perps and refinance with cheaper debt.

Similarly, the FWDGHD 8.400% 05Apr2029 Corp (USD) bonds are also callable after the IPO but at 101 (higher than the perps), with 30–60 days’ notice. The 2029 bonds have an outstanding issue size of USD 900m. The bonds are trading around 103.50 (as of 7 July) and with a high 8.4% coupon, there is also economic incentive for FWD to trigger the call, allowing them to refinance with cheaper debt.

In our view, another incentive for an early redemption, may come from a potential improvement across FWD’s credit metrics (such as debt and interest coverage ratios) if the Group triggers an early call to replace the costlier perpetuals and 2029 bonds with cheaper debt.

Can FWD afford to call back the bonds?

The IPO raised proceed of around USD 442m and is not sufficient to redeem either the i) USD 900 million 2029 bond, ii) the USD 750m 8.045% perp, and/or ii) the remaining outstanding perpetual securities in full. As such, we think it is likely that FWD will fund the early redemption with a new debt issuance (likely at a lower cost), to supplement the USD 442m IPO proceeds.

Our Recommendations

Considering our recommendation for FWDGHD 8.400% 05Apr2029 Corp (USD) and its probability of an early redemption, we advise existing bondholders and prospective investors to be aware of the early redemption risk at 101. As this risk has risen noticeably since our previous update (no signs of an intended IPO then), we will suspend our positive view on the 2029 bonds until further update.