UK telecoms heavyweight Vodafone is looking to raise £2.9bn by issuing mandatory convertible bonds.

The bonds will be issued in two tranches, one with a maturity of 18 months, and another with a maturity of three years. The coupon for the former is expected to be between 1.2-1.5 per cent a year, and 1.7-2 per cent a year for the latter.

Vodafone says the number of shares into which the bonds are convertible represents five per cent of its share capital, and there is potential for it to buy back shares following conversion in order to mitigate dilution. On the price, Vodafone said:

The initial Conversion Price will be determined on the basis of the higher of (i) GBP2.1730 (being Vodafone’s closing share price on the London Stock Exchange on Wednesday, 17 February 2016 and (ii) the arithmetic average of the daily volume-weighted average prices of an Ordinary Share on the LSE over a period of three consecutive scheduled trading days starting on 19 February 2016.

The actual price will be announced by the company after trading on February 23.

Vodafone says it “intends to use the net proceeds of the offering of the bonds for general corporate purposes and for provision of collateral under the option strategy.”

Vodafone pulled off a coup last year, issuing convertible bonds with no coupon.

The issuance comes on the heels of the UK telecoms giant announcing a merger of its operations in the Netherlands with US cable group Liberty Global.

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