Marconi to redeem more 8% senior notes

New York, March 9 - Marconi Corp. said that it has given notice to the owners of its 8% guaranteed senior secured notes due 2008 of its intentions to redeem $29.7 million principal amount of the securities on March 23 at a redemption price of 110% of the principal amount of the securities being redeemed, plus 68 days of accrued interest up to the redemption date.

This mandatory partial redemption of the 8% notes is the third that the company has announced. Marconi said that in line with the mechanism used for the previous partial redemptions, a pool factor will be applied to every holding. Further details of the pool factor to be applied from the redemption date will be announced once the pool factor has been confirmed by the registrar for the transaction.

The third mandatory partial redemption of the 8% notes follows the receipt by Marconi of proceeds from the previously announced final redemption of the company's 10% guaranteed junior notes due 2008, which took place on March 8. Marconi received these proceeds due to its holdings of $29.8 million of the 10% notes following previously announced market repurchases of the notes undertaken on Feb. 17.

As previously announced, Marconi, a London-based maker of telecommunications equipment, announced plans on Feb. 23 for its first mandatory partial redemption of its 8% notes, with some $58.9 million of the notes to be redeemed on March 8 at a price of 110% of the principal amount, plus 53 days accrued interest up to the redemption date.

The company said that redemption would reduce the total outstanding principal amount of the 8% notes to $658.3 million.

Marconi said that the first partial redemption was the result from the separately announced disposal by Marconi of its North American Access business, which it said would produce $240 million of cash proceeds.

On March 5, Marconi announced a second partial redemption of the 8% notes, with $73.7 million principal amount of the securities to be redeemed on March 18 at a redemption price of 110% of the principal amount of the securities being redeemed, plus 63 days of accrued interest up to the redemption date.

Marconi said plans for the second redemption primarily resulted from the release of the full balance of $68 million held within the existing performance bond escrow account (as part of Marconi's financial restructuring, this balance was lodged in the escrow account to cover potential calls for collateral from a number of Marconi's performance bond providers who had rights to call for collateral, whether conditional or unconditional). The company said that under the terms of the escrow arrangement, its board is permitted to request early release of amounts held in the escrow account that are considered to be in excess of expected collateral calls. Marconi said that having reviewed the position, and given that no calls for collateral had been received against the performance bonds covered by the escrow account, the board took the view that the monies held in the escrow account should now be released.

The company additionally said that the second redemption would include the receipt of $7 million relating to the deferred payment arising from finalization of the completion accounts from the previously announced GDA sale and $7 million that Marconi received on Feb. 24 as a result of the partial redemption of the company's 10% notes that it had repurchased on Feb. 17. It said that as a consequence of the release of the $68 million from the escrow account, the $7 million already received following the partial redemption of repurchased 10% notes is included in the notice of second partial redemption the company issued.

Marconi further said that it would receive a further $33 million following the redemption of its remaining repurchased 10% notes on March 8 and this would, in turn, trigger a further redemption of the 8% notes.

Concurrently with the Feb. 23 announcement, Marconi also said that it had informed the holders of the 10% junior notes of its plans to complete the redemption of those securities, with $157.2 million of the securities to be redeemed on March 8 at a price of 110% of the principal amount, plus 38 days of accrued interest up to the redemption date.

The outstanding amount of the 10% notes had been gradually reduced to $157.2 million from the originally issued $486.7 million in a series of previously announced redemption transactions. It said that following the latest mandatory partial redemption transaction, none of the 10% junior notes would remain outstanding.

Marconi also noted that as it had previously announced, it repurchased $36.2 million of the 10% junior notes on Feb. 17. It said that following the redemption of these notes on Feb. 24, and those being redeemed on March 8, Marconi would receive some $40.2 million, which will be transferred to the mandatory redemption escrow account (a separate escrow account from the previously mentioned existing performance bond escrow account). This will be used to fund a further redemption of $36.1 million of the 8% senior notes, which would take effect on or about March 24.

The paying agent, registrar and depositary for the redemption transactions is The Bank of New York in London (contact Emma Wilkes at +44 20 7964 7662).

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