Logica issues bonds in favourable climate

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The IT services company LogicaCMG decided yesterday to take advantage of low interest rates and rising stock markets by launching a convertible bond.

The company, whose shares closed up nearly 20 per cent on Wednesday after it published its half-year results, raised €263.8m (£182m) through the issue.

The cash will go on refinancing some of its existing bank facilities. LogicaCMG's net debt totalled £186.3m at the end of June, up from £107m six months before.

Convertible bonds have become a popular way of raising money in recent times since interest rates are low while equities have been rising. Companies including Lastminute.com, Hilton and Cable & Wireless have all taken advantage.

"It works on the same principle as mortgages in that you get a very low coupon. It's just very opportunistic at the moment," said one analyst who did not want to be named.

LogicaCMG issued €263.8m of bonds, due in September 2008, which will be convertible at 372.53p each. The company said the issue had been oversubscribed. The bonds will pay interest of 2.875 per cent.

LogicaCMG made its decision the day after issuing its first-half results boosted, it said, by market share gains.

Pre-tax profits to 30 June were £39.4m, before exceptional items - 33 per cent beneath the same period a year before although that was better than expected.

The company, whose customers have cut their spending on IT in the face of tough economic conditions, warned that trading remained tough.