ABB, the Swiss-Swedish engineering group, is retiring early $968m of convertible bonds as part of its strategy to restructure its balance sheet and improve its current credit rating.
The company said on Tuesday that 98 per cent of bondholders had accepted early conversion of the bonds, which were due in 2007, into American Depository Reciepts at $9.03. ABB will also pay them a cash incentive of 1.25 per cent and a dividend equivalent payment of 1.0 per cent of the notional value of the bonds.
Bankers said most investors accepted the offer because the bonds were approaching their call value on the back of strong share price appreciation since November last year, which meant ABB could have called them any time.
The ADRs were little changed in trading on Tuesday at $14.44.
ABB issued the bonds in 2001 when it was recovering from a financial crisis. The group has steadily turned itself round, posting a profit in 2005 and announcing a strong first quarter this year.
“From the company’s perspective, there were three key aims to this deal: to improve our equity structure, to reduce our financing expense and to improve the duration of our debt portfolio by retiring almost $1bn of debt,” said Michel Demaré, chief financial officer of ABB.
ABB has a corporate credit rating of BBB-/A-3, the lowest investment grade rating, from Standard & Poor’s, which put the group on positive credit watch at the end of April when the early conversion offer was announced.
Barclays Capital, Deutsche Bank and HSBC were lead managers for the offer.
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