Nokia draws $2 billion financing option from Microsoft to fund NSN acquisition

As a part of Microsoft’s acquisition of Nokia’s handset business, Microsoft had agreed to provide financing of nearly $2 billion in the form of three equal tranches of convertible bonds. Nokia has decided to draw down all of this financing. “Nokia intends to use the proceeds of the offering to prepay financing raised for the acquisition of the shares in NSN which was completed in August 2013 and for general corporate purposes,” the company announced in a statement.

At the time of announcing the NSN deal where Nokia acquired Siemens’ 50 percent stake in the joint venture for $2.2 billion, Nokia had announced it would pay $1.56 billion in cash at the time the deal is closed and the remaining would be paid in the form of secured loan from Siemens that would be due in a year.

Read on for the complete statement.

Nokia to issue convertible bonds of EUR 1.5 billion to Microsoft

Nokia Corporation

Stock exchange release

September 6, 2013 at 18.40 (CET+1)

On September 3, 2013 Nokia announced that, in connection with its announcement to sell to Microsoft Corporation substantially all of its Devices & Services business (the “Sale of the D&S Business”), Microsoft had agreed to make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible bonds.

Today, Nokia announces that it has decided to draw down all of this financing and thus Nokia will issue three tranches of senior unsecured convertible bonds, each with a nominal value of EUR 500 million (the “Bonds”). Nokia’s Board of Directors decided today to issue the Bonds on the basis of the authorization granted by the Annual General Meeting of Nokia held on May 7, 2013.Nokia intends to use the proceeds of the offering to prepay financing raised for the acquisition of the shares in NSN which was completed in August 2013 and for general corporate purposes.

The key terms of the Bonds to be issued are as follows:

– The first tranche (the “2018 Bonds”) matures in 5 years and has a 1.125% per annum coupon payable semi-annually with an initial conversion price of EUR 3.9338.

– The second tranche (the “2019 Bonds”) matures in 6 years and has a 2.5% per annum coupon payable semi-annually with an initial conversion price of EUR 4.0851.

– The third tranche (the “2020 Bonds”) matures in 7 years and has a 3.625% per annum coupon payable semi-annually with an initial conversion price of EUR 4.2364.

If the Sale of the D&S Business is completed, the Bonds will be redeemed and the principal amount and accrued interest netted against the Sale of the D&S Business proceeds.

All the Bonds are issued at par and will be redeemed at par on the closing date of the Sale of the D&S Business. Should the Sale of the D&S Business not be completed, the Bonds will be redeemed at par on their respective maturity dates, unless otherwise redeemed, purchased, converted or cancelled in accordance with their terms.

The Bonds are expected to be issued on or about September 23, 2013.

Microsoft has agreed not to sell any of the Bonds or convert any of the Bonds to Nokia shares prior to the closing of the Sale of the D&S business.

Should the Sale of the D&S Business not be completed, Microsoft would have the right to sell the 2018 Bonds immediately. Microsoft has agreed not to sell any of the 2019 Bonds prior to the second anniversary of their issuance date and any of the 2020 Bonds prior to the third anniversary of their issuance date.

Microsoft has also agreed not to convert any of the 2018 Bonds and any of the 2019 Bonds into Nokia shares prior to the second anniversary of their issuance date and for the 2020 Bonds prior to the third anniversary of their issuance date, except in a change of control situation. Thereafter, the conversion right continues until the date falling seven business days prior to the maturity date of the relevant bond. If the Bonds are converted into Nokia shares by Microsoft, Microsoft has agreed to vote according to recommendations of Nokia’s Board of Directors, save in circumstances where this would be construed as Microsoft acting in concert with Nokia for purposes of the Finnish Securities Markets Act.

Nokia has the right to redeem all outstanding 2018 Bonds and 2019 Bonds after the third anniversary of their issuance date plus 30 days if the volume weighted average price of the Nokia shares is at least 130% of the then prevailing conversion price for a specified period of time, and with respect to the 2020 Bonds Nokia has a similar right after the fourth anniversary of their issuance date plus 30 days. Nokia will also have the right to redeem each tranche of Bonds at any time if conversion rights are exercised and/or purchases (and corresponding cancellations) and/or redemptions are effected in respect of 85% or more in principal amount of such tranche of Bonds. The terms and conditions of the Bonds provide for adjustments of the then applicable conversion price for any dividends in cash or in kind as well as customary anti-dilution adjustments.

Nokia will make an application to include the Bonds for trading on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange as soon as reasonably practicable following the issuance date of the Bonds.

The maximum number of shares which may be issued by Nokia upon conversion of all the Bonds (based on the initial conversion price of each tranche) is approximately 367.5 million, representing approximately 8.9 % of Nokia’s shares as calculated based on current amount of shares added with shares to be issued upon conversion of all the Bonds.

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