The music company EMI became the latest in a long line of companies to take advantage of cheap funding through convertible bonds by raising $243m (£153m) yesterday.
The coupon on the bonds will be 5.25 per cent, payable semi-annually, and the conversion price will be 193.38p, a premium of 40 per cent to the reference price. The bonds will fall due in 2010.
The issue comes after rumours circulated last week that EMI could be about to enter merger talks with AOL Time Warner's music arm, Warner Music. Merger talks between Warner Music and Bertelsmann's music operation, BMG, are currently at an advanced stage. However, analysts agreed that EMI would need to have made a significantly bigger issue if it was raising money for such an acquisition.
Roger Faxon, the chief financial officer, said the offering was the continuation of a "strategy aimed at repositioning and extending the maturity of our debt". He went on to say that future debt restructuring could not be ruled out. Steps may be taken "in the near future" to further diversify debt and lengthen debt maturity, he added.
Convertible bonds have proved a popular form of funding for UK companies this year. Last week Hilton and LogicaCMG followed Scottish Power and Cable and Wireless in taking advantage of a combination of low interest rates and stronger equities markets.
The issue was heavily oversubscribed and should give the company confidence to make further restructuring moves.
EMI, whose artists range from rock dinosaurs Rolling Stones to newer talent such as Coldplay and Norah Jones, had their credit-rating cut to "junk" level by the credit ratings agency Moody's in March, and Standard & Poor's rates EMI debt at the lowest investment-grade rating of BBB-.
With net debt of £860m at the end of March and market capitalisation of £1bn, the company's debt situation has been a concern for some time. Last week EMI saw its share price fall after the world's biggest record company, Universal, announced it would be slashing prices of CDs by up to 24 per cent in the US.
Shares in EMI closed up 0.25p at 137.25p.Reuse content