Privatisation bonds

8 July 2003 By Hugo Dixon Follow @hugodixon

The state is tapping into the redhot convertible market to launch the biggest ever equitylinked bond. Almost ideal conditions allow it to set a 38% premium, pay a coupon of 0.75% and get shot of E5bn in a day.

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Germany is selling up to E5bn of bonds exchangeable into Deutsche Telekom shares, it said on Tuesday.

The transaction is being carried out via Kreditanstalt fuer Wiederaufbau, a German stateowned bank. KfW owns 12% of DT, which it previously bought from the German state. If the bonds all convert into shares, its stake will drop by 6.4%.

The German finance minister said last month that Germany might sell more DT shares direct to investors or to KfW next year.

The exchangeable bond will have a fiveyear maturity. It will offer a coupon of 0.75% and a conversion premium of 38%.

KfW has said it will raise E4.5bn from the bonds, with an option to increase it to E5bn. The full E5bn will be placed, according to a person close to the transaction.

The joint bookrunners on the deal, which is expected to close on Tuesday, are Deutsche Bank and JP Morgan.

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