Vodafone has said it intends to raise some £2.9bn worth of mandatory convertible bonds, which converted into ordinary shares correspond to approximately 5% of the company’s current share capital. Earlier this week, the company agreed to pay Liberty Global €1bn as part of their Dutch JV pact.
Vodafone (LSE:VOD) has said it intends to raise some £2.9bn (US$4.2bn) worth of mandatory convertible bonds, which converted into ordinary shares correspond to approximately 5% of the company’s current share capital. The bond is being arranged by JP Morgan and Morgan Stanley.
The company, which this week agreed to pay Liberty Global (NASDAQ:LBTYA) €1bn (US$1.1bn) as part of their Dutch JV pact, said it would use the proceeds for general corporate purposes and to provide collateral for the related option strategy.
The bonds would be issued in two tranches, one with an 18-month maturity and the other with a three-year maturity.
The bonds will be issued at par. The coupon will be determined via an accelerated bookbuilding process, and is expected to be 1.20%-1.50% per annum for the 18-month tranche and 1.70%- 2% per annum for the three-year tranche.
The bonds, apart from the value of coupons payable, are expected to be accounted for as equity. They will represent subordinated debt, and Vodafone will have the option to defer coupon payments.
The initial conversion price will be determined on the basis of whichever is higher: £2.173 (Vodafone’s closing share price on the London Stock Exchange on 17 February 2016) or the average daily LSE volume-weighted share price on the three market trading days of 19, 22 and 23 February 2016. Vodafone will announce the conversion price after the markets close on 23 February 2016.
The company said it expects JP Morgan and Morgan Stanley to hedge their respective positions under call and put options.
The banks have indicated that they expect to place orders of a combined 40% of the aggregate nominal value of the bonds, which Vodafone will allocate at its own discretion depending on the results of the bookbuilding – not necessarily on the same basis as it offers other investors.
Vodafone said it would apply to list the bonds on the Irish Stock Exchange or another recognised stock exchange.
The operator added it would consider using the proceeds of the two tranches of Verizon loan notes as part-payment for the sale of its indirect stake in Verizon Wireless in 2014 to fund any on-market share buy-backs.