Vodafone Group Plc - Intended Issuance of Mandatory Convertible Bonds
· Vodafone intends to raise approximately €4 billion through the issuance of sterling-denominated MCBs
· Bonds intended to be issued in two tranches - maturing no later than March 2021 and March 2022
· Net proceeds of the bonds will be used as part of the financing of the acquisition of Liberty Global's assets in Germany, Czech Republic, Hungary and Romania
· Potential for Vodafone to buy back shares in order to mitigate dilution. Any decision to buy back shares will be taken independently of the conversion of the bonds and will be dependent on market conditions and Vodafone's financial position and outlook at the relevant time. Any such share buyback will be funded from the issuance of hybrid securities, depending on credit market conditions
· Vodafone expects to enter into an option strategy giving it the ability to mitigate, partially or fully, any share price appreciation relative to the initial conversion price of the bonds, should it decide to execute a share buyback. Vodafone reserves the right to cancel or modify any option strategy entered into during the tenor of the bonds
Vodafone Group Plc ("Vodafone") announces its intention to raise approximately €4 billion of sterling-denominated MCBs, to be issued in two tranches maturing no later than March 2021 and March 2022 (together, the "Bonds").
The Bonds will be physically settled on mandatory conversion in accordance with their terms. Vodafone will be entitled to satisfy this delivery obligation by allotting and issuing new ordinary shares of Vodafone ("Ordinary Shares") to Bondholders or by transferring existing Ordinary Shares from treasury. The number of Ordinary Shares into which the Bonds are initially convertible (determined by dividing the nominal amount of the Bonds by the Conversion Price described below) is expected to represent approximately 9.8% of Vodafone's current share capital and falls within the limits approved by Vodafone's shareholders at its annual general meeting in July 2018 for the purposes of making offers of Ordinary Shares on a non-pre-emptive basis.
The initial Conversion Price will be determined on the basis of the higher of (i) GBP 1.3136 (being Vodafone's closing share price on the London Stock Exchange (the "LSE") on Monday, 4 March 2019, the "initial Share Price") and (ii) the arithmetic average of the daily volume-weighted average prices of an Ordinary Share on the LSE on each of the three scheduled trading days starting on (and including) 6 March 2019. The Conversion Price, as so determined, will be announced by Vodafone following the close of market trading on the LSE on 8 March 2019.
Vodafone intends to use the net proceeds of the offering as part of the financing of the acquisition of the Liberty Global assets in Germany, Czech Republic, Hungary and Romania, including the refinancing of bank loans that are repayable at par, and for general corporate purposes.
The Bonds will be issued at par. The coupon will be determined via an accelerated bookbuilding process and is expected to be between 1.40% to 1.70% per annum (in respect of the Bonds maturing no later than March 2021) and between 1.70% to 2.00% per annum (in respect of the Bonds maturing no later than March 2022). The Bonds (less an amount equal to the present value of all future coupons under the Bonds) are expected to be accounted for as equity. In addition, and in accordance with securities of this type, the Bonds will represent subordinated debt of Vodafone and all coupon payments to be made under the Bonds are deferrable at Vodafone's option.
The Joint Bookrunners that are expected to enter into an option strategy with Vodafone have informed Vodafone that between them they expect to put in orders of approximately, but not exceeding, 45% of the aggregate nominal amount of the Bonds issued, which will be subject to allocation at Vodafone's discretion depending on the result of the bookbuilding; such allocation may not necessarily be on the same basis as to other investors in the transaction.
After the Bonds have been issued, Vodafone intends to apply for the Bonds to be admitted to trading on Euronext Dublin's Global Exchange Market or another recognised stock exchange.
Vodafone expects to enter into an option strategy consisting of (i) call options to hedge against any potential increase of the share price of the Ordinary Shares; and (ii) corresponding put options to decrease the cost of entering into the call options. Such options would be expected (subject to limited exceptions) to have scheduled exercise dates on 125 consecutive trading days beginning three days after the delivery of Ordinary Shares pursuant to a conversion of the relevant tranche of Bonds referencing the arithmetic average of the daily volume-weighted average prices of an Ordinary Share on the LSE, BATS, Chi-X or any other exchange determined at the relevant time. It is anticipated that any Joint Bookrunners entering into the option strategy with Vodafone and/or their respective affiliates will enter into transactions to hedge their respective positions under the call and put options described above, which may include transactions to be conducted during the share reference period for the determination of the initial Conversion Price, as well as subscribing for a proportion of the Bonds themselves as described above.
Reference is also made to Vodafone's share buy-back programme currently being operated by J.P. Morgan Securities plc, which will continue to operate during and after the share reference period for the determination of the initial Conversion Price. Please refer to Vodafone's announcement of 28 January 2019 for further details.