The pounds 700m issue, the biggest sterling convertible bond ever, targets high yield investors. BAe's move comes on the heels of an over-subscribed pounds 460m high yield issue by Orange in early June. High-yield, or "junk" bonds as they are termed because of their weak credit quality, are a long-established asset class in the US, but relative newcomers to European markets.
The sale of BAe's remaining stake had been expected since the aerospace manufacturer sold a 16.1 per cent block of Orange shares last year.
The Orange bond issue will be priced at a premium of between 27 and 30 per cent above the closing price of Orange stock, which ended down 24 pence at 884p yesterday.