Marconi purchases 8% senior notes on open market

New York, March 11 - Marconi Corp. plc said that it had purchased $32.9 million principal amount of its 8% guaranteed senior secured notes due 2008 in open market transactions, for a total cash outlay, excluding accrued interest and fees, of $36 million.

The company said that under the terms of the notes' indenture, the repurchased notes will be cancelled within 90 days and may not be re-issued or resold to any third party. Marconi said it may purchase additional senior notes.

It said that the repurchase of the notes brings the total amount of the 8% notes which Marconi has so far repurchased or redeemed to $91.8 million, reducing the principal amount of the notes outstanding and not owned by Marconi to $625.3 million.

It further said that when the previously announced second and third partial redemptions of the notes are completed on March 18 and March 23, as scheduled, the principal amount of senior notes outstanding and not owned by Marconi will be further reduced to $527.2 million.

Marconi expects to receive $5.8 million - representing the share of the second and third partial redemptions relating to senior notes it currently owns. This amount will be transferred to the company's mandatory redemption escrow account and used to fund further partial redemptions of the senior notes.

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.

In line with the mechanism used for the previous partial redemptions of its 10% guaranteed junior notes due 2008 (all of which have now been redeemed), a pool factor would be applied to every holding, with further details of the pool factor to be applied from the redemption date to be announced once the pool factor was confirmed by the registrar for the transaction.

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 was permitted to request early release of amounts held in the escrow account that are considered to be in excess of expected collateral calls.

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 additionally 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.

On March 9, Marconi gave notice to the 8% noteholders of its plans for a third partial redemption of $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.

It said that the third mandatory partial redemption would follow the receipt by Marconi of proceeds from the previously announced final redemption of the company's 10% notes, 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.

Marconi had previously announced a series of partial redemptions of the 10% notes, which were completed on March 8, when the final $157.2 million of the securities were redeemed at a price of 110% of the principal amount, plus 38 days of accrued interest up to the redemption date. No further 10% notes remained outstanding after that transaction, which had had been announced on Feb. 23. The outstanding amount of the 10% notes had been gradually reduced to that final $157.2 million from the originally issued $486.7 million in the earlier transactions.

Marconi also noted at that time 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 that were redeemed on March 8, Marconi would receive some $40.2 million, which the company would transfer to the Mandatory Redemption Escrow Account (a separate escrow account from the previously mentioned Existing Performance Bond Escrow Account) . It said that this would 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 company's various redemption transactions is The Bank of New York in London (contact Emma Wilkes at +44 20 7964 7662).

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