Nokia Siemens Networks is set to turn to the public markets for finance for the first time, with plans to issue a high-yield bond that will help gauge broader investor interest in the telecoms equipment maker.
The company, which is jointly owned by Nokia and Siemens, aims to raise as much as €700m with high-yield bonds this spring, according to people familiar with the plan. It will use the money to pay down existing bank debt and fund future investment.
The move is significant given the potential for a future flotation of the business, which has been recently rejuvenated by its parents. Nokia and Siemens talked to private equity groups about a sale of NSN last year but failed to strike a deal, forcing the groups to bolster its balance sheet with a further €1bn of equity.
Since that equity injection, NSN has seen a marked improvement in an otherwise tough telecoms equipment market, where its previously core businesses have been commoditised by the arrival of cheaper Chinese manufacturers such as Huawei and ZTE.
Rajeev Suri, who became chief executive in 2009, began a drastic cost reduction programme last year that will see NSN cut 17,000 jobs by the end of this year. The company is also selling a range of non-core businesses as part of plans to focus on the most profitable areas such as mobile broadband and services that have higher barriers to entry.
This strategy is already paying off, with three consecutive quarters of underlying profitability for the first time in its history. That has led to renewed talk among financiers about a potential flotation or sale next year.
One person with knowledge of the situation said that the bond issue would provide an early test of the appetite among investors, although the person added that there were no plans at present for an exit by its owners.
Indeed, NSN has become an unexpected highlight for Nokia in recent financial results, with the positive momentum of the telecoms equipment unit offsetting some of the issues in its handset business.
NSN has a bank facility of about €1.5bn, of which only half has been drawn so far. The money raised from the bonds will be used to pay back the drawn debt.
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