Convertible conundrum

15 October 2003

The details of the deal are obscure. But there could be a couple of stings in the tail for investors. Marco Tronchetti Provera’s latest deal will patch up a key holding company s finances ahead of a capital increase. Marco Tronchetti Provera s latest deal will patch up a key Telecom Italia holding company s finances ahead of a capital increase.

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Olimpia, the holding company through which Marco Tronchetti Provera controls Telecom Italia, is selling its holding of TI bonds that are convertible into TI shares, according to people familiar with the situation.

The identity of the buyers is not yet known but they are thought to be financial intermediaries.

The convertible bonds form part of a collateral package guaranteeing a E1.8bn loan made to Olimpia by Unicredito and Banca Intesa, two Italian banks. Part of this loan was syndicated to other banks.

The bonds, which mature in 2010, have been trading at a premium of 17% to face value. They are convertible at a price of E2.12 per TI share. The shares were trading at E2.23 in afternoon dealings on Tuesday.

Olimpia is expected to receive TI shares as consideration for the convertibles it is selling, or else acquire them with the consideration. This would allow it to increase its holding in TI from about 11.5% to just over 14%.

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