KPN offers to buy back $700 mln in bonds
Tue Jun 2, 2009 11:32am EDT
* Buyback helps KPN keep to leverage target
* KPN offers premium over par and over market price
(Adds background, detail, analyst comment)
LONDON, June 2 (Reuters) - Dutch telecoms company KPN (
KPN.AS) on Tuesday offered to buy back up to $700 million worth of 2010 bonds at a premium to reduce its debt and interest payments.
The buyback of part of its $1.75 billion, 8 percent 2010 bond will help keep KPN's total net debt within its self-imposed target of two to 2.5 times earnings before interest, taxes, depreciations and amortisation (EBITDA), company spokesman Stefan Simons said.
It also will save payment of 8 percent interest on the tendered portion of the debt, Simons said, adding that "it was the most profitable way to utilise excess cash".
The buyback "highlights the changing environment that credit markets find themselves in," ING credit strategists said in a note. "Companies initially eager to tap markets are now studying the balance sheet to see the possibility to reduce funding costs."
Jeroen van den Broek, head of investment-grade strategy at ING said KPN "has got very specific leverage goals that they live up to all the time".
In February, KPN raised 750 million euros for five years and 750 million euros for 10 years in a two-part bond sale.
The company is now offering to pay $1,065 for every $1,000 principal amount to investors who tender their bonds by 5 p.m. New York time on June 15. Those who miss the early deadline but tender by the June 29 expiry will get $1,045 for every $1,000.
That price is at a premium not only to par but also to prices in the secondary market, where the bond is trading at around 105.60 cents on the dollar, ING's van den Broek said.
He calculated the spread of the offer price at between 140 and 150 basis points, saying that it was not at a premium when compared to the yield curve in euros.
"We would recommend holders to tender," ING said.
(Reporting by Jane Baird; editing by Karen Foster)
