Nokia Corporation priced a 5yr €750 Million of Convertible Bonds with a coupon of 5% per annum, payable semi-annually. The initial conversion price has been set at €2.6116, representing a 28% conversion premium to the VWAP of Nokia shares. The bonds are issued at par and will be redeemed at par on maturity on October 26, 2017.
According to a company press release, “Nokia intends to use the net proceeds of the offering to prudently manage its capital structure, proactively address upcoming debt maturities while preserving existing pools of liquidity and for general corporate purposes.”
Issues to Consider:
BAML views this transaction as being opportunistic, clearly the company is actively managing its liquidity ahead of the €2014 bond maturity. From a fundamental perspective, their view with respect to the credit remains unchanged, and they see downside risks to results heading into 2013.
The front end of the curve steepened yesterday as investors become more comfortable with short term liquidity however they are still concerned about the back end of the curve as they believe that the company faces meaningful challenges going forward with respect to smart phone sales growth as well as NSN.
In terms of Nokia debt, BAML is Overweight-30% on 5-yr CDS (1015bps offer), Underweight-70% on the €2019 bonds (96.5 offer), and Underweight-30% €2014s (102.3 offer).
As a side note, consulting firm IDC released Q3’12 handset market share numbers. Nokia Corporation (NYSE:NOK) was replaced by RIM as a top 5 smart phone vendor, after being in the group since tracking began in 2004. Nokia Corporation (NYSE:NOK) sold 82.9 million mobile phones in the third quarter, down 22.2 percent, according to the statement. Nokia Corporation (NYSE:NOK) controlled 18.7 percent of the market. Apple followed with 6.1 percent and Seoul based LG Electronics Inc. was fourth with 3.1 percent.
Top 5 smart phone vendors worldwide: Samsung (35% market share), Apple (17%), RIM, ZTE, HTC
Top 5 mobile phone vendors worldwide: Samsung (23.7% market share), Nokia (18.7%), Apple (6.1%), LG Electronics (3.1%), ZTE