Bottom Line: Mail's debt swapping

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THE DAILY Mail & General Trust is rather cleverly killing two birds with one stone with its unusual pounds 50m convertible.

The issue, the third such by the company, may look complicated - the bonds are convertible into 2.6 million Reuters shares owned by the company rather than into DMGT shares.

But the group's aims are simple enough. The proceeds of the convertible will be used to replace more expensive debt while continuing the company's progressive reduction of its non-core investment in Reuters, the news agency, in a tax-efficient fashion - capital gains tax on the shares is deferred until conversion.

Indeed it has already kicked off the first part of this process and will be redeeming (on 26 September) the remaining pounds 14.5m at 8.25 per cent outstanding on an earlier Reuters convertible issued by its subsidiary Associated Newspapers.

The latest issue, due 26 September 2003, earns 5.34 per cent per annum paid semi-annually and will convert at pounds 19.18 - a 27 per cent premium to Reuters shares on pricing. They can be called at par at the option of the DMGT as of 9 October 1998.

Despite being primarily a debt-swapping exercise, the publisher of the Daily Mail, Mail on Sunday and Evening Standard newspapers will probably be left with some change from the issue.

This should come in handy in funding the estimated pounds 10m- pounds 20m of start up costs involved in its planned launch of three new supplements, due to run alongside each of its publications.