Jazztel to buy back up to €140 million 5% convertibles at 50 under restructuring agreement

By Angela McDaniels

Tacoma, Wash., May 6 - Jazztel plc has reached an agreement with the principal holders of its €275 million 5% convertible bonds due 2010 to restructure the bonds, according to a company announcement.

Under the agreement, Jazztel will purchase up to €140 million of the bonds from the holders at a price equal to 50% of par.

The maturity of bonds that remain outstanding after the repurchase will be extended by three years to April 2013, with periodic partial amortizations, and the coupon will be increased to 9.75%.

The bonds will also cease to be convertible.

Bondholders will vote on the proposed restructuring at a meeting on May 29, and the company expects the restructuring to be completed in July.

The holders who entered into the agreement include Boussard Gavaudan Asset Management and hold more than 75% of the outstanding bonds, excluding the €23.67 million principal amount held by Jazztel.

Rights issue

Jazztel will fund the restructuring with the proceeds of a rights issue, which it expects to generate up to €80 million of proceeds.

The price at which the new ordinary shares will be issued will be at least €0.12 and will be determined prior to the rights issue subscription period.

Chairman and principal Leopoldo Fernandez Pujals has promised to subscribe for all the shares he is entitled to under the rights issue and to vote in favor of any resolution that may be needed to implement the agreement at the different corporate levels.

If the rights issue is oversubscribed and market conditions permit, the company may choose to raise up to an additional €10 million through a non pre-emptive issue of shares at a price determined by the board of directors.

The repurchase of the bonds will reduce the outstanding principal amount to between €111.33 million and €119.33 million from €251.33 million, and the €23.67 million of bonds held by the company will be cancelled.

Jazztel said the range of outstanding bonds relates to the fact that if the rights issue is more than 95% subscribed, it has the option of issuing additional shares in exchange for bonds to cover the shortfall from the rights issue or leaving a greater amount of debt outstanding up to €119.33 million.

The bondholders have agreed, if required, to subscribe for shares in exchange for the delivery of bonds for cancellation. Those bonds would be cancelled at a discount of up to 25% of par, depending on the rights issue subscription level, and the price of the shares issued would be €0.12 per share.

Bondholder warrants

The company said that to compensate bondholders for the discount applied in the repurchase of their bonds, it will issue 200 million warrants to the bondholders pro rata to their holdings once the rights issue has been completed.

Each warrant will allow the holder to subscribe for one ordinary share. The exercise period will be four years, and the exercise price will be of €0.18 per share.

Of the total number of warrants, 100 million will have a mandatory exercise condition that will be triggered if the share price reaches or exceeds €0.27 per share on 20 trading days within a period of 30 consecutive trading days, failing which those unexercised warrants will lapse.

The company noted that because the bonds will cease to be convertible, Pujals will, on completion of the restructuring, have the right to recall 152,777,777 ordinary shares that are currently the subject of a stock loan to Dresdner Bank AG.

Jazztel is a Madrid-based telecommunications company.

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