MmO2 gears up for £470m bond issue

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The Independent Online

The mobile phone company mmO2 yesterday confirmed plans to tap bond markets in an effort to refinance some of its existing bank debt.

The group, which recently demerged from BT and operates the UK's Cellnet mobile phone service, is thought to be considering launching a €500m to €750m (£312m to £469m) euro bond to part refinance its £3.5bn bank facility.

The move, which will help the company finance the roll-out of next generation services more cheaply, was widely expected by the market and its shares closed up 2.5p, or 2.9 per cent, at 89p.

The exercise, however, is likely to be keenly watched both to gauge the level of investor interest in mmO2 itself and to monitor the level of interest in financing mobile phone companies in general.

The company will start its bond roadshow to potential investors next week. The roadshow, which will determine demand as well as set the price, is expected to take a week. Deutsche Bank, HSBC and Schroder Salomon Smith Barney are managing the issue.

"We always said we aimed to come back to the market and refinance," an mmO2 spokesman said, adding: "The roadshow will enable us to assess the demand and appetite for the issue and to price it accordingly."

The current £3.5bn facility for mmO2, arranged last September before it split from BT, is divided into two equal tranches. The first tranche expires five years after the date the deal was signed while the second £1.75bn portion terminates one year after signing.

It is the second tranche of that facility that mmO2 plans to part-refinance with the new bond issue. The company's debt is currently rated BBB- by the credit rating agency Standard & Poors and Baa2 by the rival group Moody's.

The group, which split from BT in November with around £500m of debt, has been given a lukewarm reception by the stock market and is widely viewed as a takeover target.

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