FRANKFURT -(Dow Jones)- German state-owned KfW Bankengruppe Tuesday said it successfully placed a bond convertible into Deutsche Telekom shares in a renewed attempt to reduce its stake in the company.
KfW said the terms of the exchangeable bonds, which have a maturity of five years and one month, have been fixed at a 3.25% coupon, an exchange premium of 27.5% and an exchange price of EUR14.9341 per exchange share.
A person familiar with matter who declined to be named told Dow Jones Newswires that the bond attracted a wide range of investors. The book was covered several times over within hours. KfW spokesman Alexander Mohanty confirmed that the bond was "considerably oversubscribed" but didn't elaborated further.
KfW said an earlier bond issued in 2003, due in August, will probably be repaid in cash instead of Telekom shares because of the telecom company's low share price.
Mohanty said investors in the new bond will also have the option to convert it into cash or Deutsche Telekom shares.
Deutsche Telekom's shares have fallen around 6% in the past year, in line with the overall market. Its shares Tuesday ended the day down 2.35% at EUR11.66 in an overall stronger Frankfurt market.
"In the light of the current share price, it's not surprising that investors prefer cash instead of shares," said Bayerische Landesbank analyst Robert Gallecker. He has a buy rating on the stock.
KfW said it has hired Goldman Sachs International and Morgan Stanley as bookrunners and joint lead managers for the new issue.
The deal, which will have a maturity of five years and one month, is callable after three years and one month, subject to a 130% call threshold. The bonds are exchangeable into Exchange Shares after the first coupon payment date after one year and one month.
KfW issued a bond convertible in Deutsche Telekom's shares with a volume of more than EUR5 billion in 2003. The new bond has a volume of EUR3 billion and a greenshoe option of EUR300 million, KfW said.
KfW said the new bond should be taken as a sign the state-owned bank and the German finance ministry want to continue the privatization of Deutsche Telekom.
KfW and the German government currently own 16.9% and 14.8% of Deutsche Telekom, respectively.
Analysts at Independent Research said KfW's new convertible bond doesn't change their view on Deutsche Telekom's share price performance. The new shares from Tuesday's bond will enter the market in five years' time, so currently there's no reason to change estimates on the stock, the analysts said. They maintain their reduce rating with a EUR11 target price.
Deutsche Telekom and KfW denied market speculation that the repayment of the convertible bond due in August will have a negative effect on Deutsche Telekom's free cash flow.
"We've issued the bond and we will repay it, of course," KfW Bankengruppe spokesman Mohanty said. "The repayment of the bond will not affect Deutsche Telekom's free cash flow," company spokesman Andreas Leigers said.
Deutsche Telekom expects 2008's free cash flow before dividend payments to be the same as 2007's EUR6.6 billion.
-By Archibald Preuschat and Ruediger Schoss, Dow Jones Newswires, +49 (0) 69 29725505, archibald.preuschat@dowjones.com
(END) Dow Jones Newswires
Posted to the site on 13th May 2008
Posted to: www.cellular-news.com/story/31133.php