GUS offers bondholders £5m to back demerger

GUS, the retail-to-financial services group, moved to avert a costly showdown with maverick bondholders yesterday by altering the terms of its bonds ahead of cleaving itself in two later this year.

The company, which is demerging its Experian credit-checking arm from its Argos retail business, is offering bondholders £5m if they back its plans. It was forced to square up to bondholders after Morgan Stanley and Goldman Sachs fronted a campaign to try to get GUS to buy back bonds on the grounds that the demerger represented a default.

Analysts say it could have cost GUS an extra £70m to buy back the £700m contested bonds. "This is a move by GUS to try to pre-empt any action by renegade bondholders that could possibly disrupt the path to a demerger," one analyst said.

All £1.3bn of outstanding bonds will transfer to Experian following the demerger, which is expected some time between October and next March, GUS said. Argos Retail Group has been spared the bonds because it carries its own off-balance-sheet debt in the form of the lease commitments on its Argos and Homebase stores.

GUS is encouraging its bondholders to back the new terms ahead of a meeting on 13 June. It will cost GUS about £5m plus legal fees to settle the dispute. In return for backing GUS, the new terms will allow bondholders to sell the bonds back to Experian in any change of control following the demerger.