Next offers olive branch to bondholders

NEXT, the fashion retailer, has responded to disgruntled bondholders who missed the chance to redeem their bonds in October by tabling an alternative, though less generous, proposal. It is offering the rump of 3,500 bondholders one new ordinary share - worth 149p at yesterday's close - for every pounds 2 of bonds, writes Patrick Hosking.

That compares unfavourably with the 29 per cent premium given to bondholders who redeemed at the due date in October. However, it is more attractive than the existing conversion terms of 21/2 shares for every pounds 10 of bonds.

Next received complaints from investors who last year missed the only opportunity in 15 years to redeem their bonds. With only pounds 1.49m of bonds left unredeemed, the market became highly illiquid.

David Keens, finance director, said even if all holders accepted, the dilution of existing shareholders would be negligible, adding just 1 million shares to the 370 million in issue.

He said fewer than 20 bondholders had complained about Next's decision not to alert them. Next's explanation then was that it would have been difficult to contact bondholders because they were bearer bonds.

The retail group, which is understood to have enjoyed strong Christmas sales, took advice from its lawyers, the Stock Exchange and the bond trustee Law Debenture Trust before making the offer. Bondholders have until Friday to accept.

The original pounds 100m of bonds were 5 3/8 per cent convertible bonds issued in 1987. Next said it would not make any other tender offer for at least another 12 months. All bondholders will be entitled to the interest payable on 15 January, whether they accept or not.