Telefonica has moved to cut its 14.77% stake in Telecom Italia (TI) by as much as 6.5% by issuing a €750m exchangeable bond.
The three-year 6% notes can be converted into TI shares within a range of €0.86 to €1.03 euros per share, which will leave…
Telefonica has moved to cut its 14.77% stake in Telecom Italia (TI) by as much as 6.5% by issuing a €750m exchangeable bond.
The three-year 6% notes can be converted into TI shares within a range of €0.86 to €1.03 euros per share, which will leave Telefonica with a stake of between 8.3% and 9.4% in the Italian operator.
The offering follows the agreed demerger of Telco, TI’s controlling shareholder group, in which Telefonica has a majority stake.
The Spanish operator said the bond issue would reduce its holding in TI – set to be 14.77% when Telco unravels – to below where it was prior to Telco’s recapitalisation last September.
The recapitalisation was significant for Telefonica because it gave it a majority in Telco, thus giving it sway over TI. This created a conflict in Brazil where both Telefonica and TI own mobile operators – Vivo and TIM Brasil.
In December the Brazilian antitrust regulator, Cade, told Telefonica to either reduce its indirect stake in TI or find a new partner to take joint control of its direct subsidiary Vivo.
In addition to the regulatory benefits, Telefonica said the bond sale would allow it to benefit from TI’s shares rallying since the recapitalisation. It added that the issue could pre-empt any net debt increase following Telco’s demerger, which is currently awaiting regulatory approval.
HSBC, JP Morgan and Societe Generale are joint global coordinators and bookrunners on the offering, which is set to close on 24 July.
