Vodafone launching £2.9bn bond offer

Vodafone was looking at a £2.9bn fundraise on Thursday, through the issue of mandatory convertible bonds.

The FTSE 100 telco said the bonds would be issued in two tranches - 18 month maturity and three year maturity. They would be convertible into ordinary shares, in which case they would represent 5% of Vodafone's current share capital.

"The initial conversion price will be determined on the basis of the higher of [either] £2.1730, being Vodafone's closing share price on the London Stock Exchange on 17 February, or 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," the company's board confirmed.

It would announce the conversion price following close of trading on 23 February.

There was the potential for Vodafone to buy back shares following coversion of the bonds in order to mitigate dilution, using the proceeds from its disposal of $5bn (£3.5bn) in Verizon loan notes.

The company said it also planned to hedge its exposure to share price movements during the term of the bonds via an option strategy.

"Should Vodafone decide to buy back Ordinary Shares to mitigate the dilution resulting from conversion of the Bonds, the hedging strategy is intended to provide a hedge for the repurchase price," the board said.

Vodafone said it intended to use the net proceeds of the offering for general corporate purposes, and for provision of collateral under the option strategy.

"After the bonds have been issued, Vodafone intends to apply for the Bonds to be admitted to trading on the Irish Stock Exchange's Global Exchange Market or other recognised stock exchange," Vodafone's board concluded.