Getronics temporarily lowers conversion price on outstanding bonds

New York, Dec. 11 - Getronics said it is temporarily lowering the conversion prices on its two outstanding issues of convertible bonds with the goal of lowering the amount outstanding and increasing its equity.

Under the offer, holders of up to 30% of the total outstanding bonds will be able to convert their bonds at a lower price. If that percentage participates, €255 million of bonds would be converted. Getronics said it reserves the right to increase the level to 36% or €306 million of its debt. There is no minimum required for the offer, which runs until 3.00 p.m. CET on Dec. 20.

The actual conversion price will be set by dutch auction.

"We are offering a win-win situation," said Jan Docter, chief financial officer of Amsterdam-based Getronics, in a news release. "We are giving bondholders the opportunity to convert outstanding convertible bonds in a way that is beneficial to them, to our shareholders and to Getronics.

"A successful conversion will lead to a strong improvement in Getronics financial position. By strengthening our balance sheet, management can further concentrate on operational performance and cash flow generation."

If the maximum 36% is converted and assuming equal conversion of the 2004 and 2005 bonds, Getronics total shares outstanding will increase 18%. Earnings per share dilution will be less than 1% due to reduced interest expense, Getronics said.

If the maximum €306 million are converted, interest expense will fall by €9.6 million after tax, Getronics said. Equity will increase by €320 million.

Based on the temporary conversion prices and Getronics' closing stock price on Dec. 10, the company said bondholders will be able to convert at "a substantial premium" to the current market prices of the bonds, 40% for the 2004 bonds and 47% for the 2005 bonds.

The new minimum conversion price is €4.60 for the 2004 bonds and €5.10 for the 2005 bonds. Institutional investors can indicate the prices they will be prepared to convert at, providing they are at least at the minimum level. Bids at or above the temporary conversion price set by Getronics will be converted at that price. Bids below will be excluded.

At the end of the temporary period, conversion will return to the normal level of €14.53 for the 2004 bonds and €36.98 for the 2005 bonds.

ABN AMRO Rothschild is advising Getronics on the temporary conversion.

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