Tirlán borrowed €250m from the bond market to fund its purchase of the co-op from Glanbia in 2022.

The 1.875% annual interest payment on the five-year bond means that Tirlán pays €4.69m every year and then repays the full €250m when the bond matures in January 2027.

In order to meet that payment, Tirlán has approximately 15,215,179 Glanbia shares set aside as exchange property for the bond. Some quick maths shows that in order for those shares to cover the bond repayment, they will have to trade at €16.43 each at the time of the exchange. If Glanbia’s share price is lower than €16.43, then Tirlán will have to make up the difference with cash. At the moment, with Glanbia’s shares at €14.90, that shortfall is just over €23m.

However, if the price of Glanbia shares is trading above the €16.43 level – as they did for a few month this year – then the bond holders still get all the shares. For example, if the shares were trading at €19 each at the time the bond matures, the payout on the bond would be almost €290m.

What this means in practice is that the bond – which trades on the market in Frankfurt – can be used as a no-lose bet on the share price of Glanbia.

If a trader thinks the share price of Glanbia will rise, they can buy the bond and hold it. If the share price does rise, the value of the bond will also rise (see Figure 1), but if the price of Glanbia shares fall, the value of the bond will not fall below the €250m level, meaning the trader will not suffer losses as the price of Glanbia shares fall.