Deutsche Telekom is launching a mandatory convertible bond (the "security") issued through its Dutch subsidiary Deutsche Telekom International Finance.
The transaction will raise approximately EURO 2.3 billion (representing approximately 178 million underlying Deutsche Telekom common shares at the current share price). The final amount raised will be subject to Deutsche Telekom's share price at pricing and could be further increased by 10%. The Security is mandatorily convertible at maturity into common shares of Deutsche Telekom. The Security has a maturity of 3 years. The coupon and conversion premium will be set at pricing. A further announcement on the pricing of the transaction will be made in due course. This transaction is based on the approval obtained for transactions of this type at the annual shareholders' meeting on May 29, 2001.
The Security will be placed exclusively with institutional investors outside the US in reliance on Regulation S.
Deutsche Telekom is fully committed to the successful execution of its announced deleveraging program. The issuance of this mandatory convertible is complementary to this program. The instrument also allows Deutsche Telekom to access a broader investor base through the convertible market and does not increase net debt.
This transaction further strengthens Deutsche Telekom's balance sheet:
Deutsche Telekom expects to receive significant equity credit from the rating agencies and strengthen its investment grade rating position.
Upon issuance, under German GAAP, the instrument will be treated as debt until maturity. However, the mandatory conversion feature reduces Deutsche Telekom's accounting net debt at maturity and increases its equity.
This transaction also complements Deutsche Telekom's on-going financing activity and the anticipated proceeds from this transaction further support its liquidity position.
Deutsche Telekom has concluded sales or signed contracts during the past few weeks which contribute a total volume of more than EUR 4 billion to reduce the debt level. On January 28 2003, Deutsche Telekom announced the sale of the six remaining regional cable TV subsidiaries for a price of EUR 1.725 billion in cash plus additional proceeds of up to EUR 375 million depending on the value of the cable business in the future. This transaction is expected to be completed by the end of March 2003 and is subject to various conditions, including approval from the EU competition authority and financing. The sale of several parts of the real estate portfolio amounted to approximately EUR 1.1 billion in the fourth quarter of 2002. The sale of around 10 per cent of the shares of T-Online International to institutional investors around the world generated a transaction value of around EUR 730 million. The sale of the 10.87 per cent holding in the satellite operator EUTELSAT S.A. generated a transaction value of approximately EUR 210 million. A sale price of 55 million dollars was agreed for the sale of the 16.3 per cent holding in the Ukrainian mobile communications company UMC to the Russian company MTS. Furthermore, Deutsche Telekom's subsidiary T-Systems International sold receivables from customers amounting to around EUR 273 million as part of an asset-backed securities transaction.
Goldman Sachs International and Morgan Stanley & Co. International Limited are joint bookrunners on the transaction.
This announcement is for information purposes only and is not an offer to sell, or the solicitation of an offer to buy, any securities.
The distribution of this press release and the offer and sale of Deutsche Telekom securities in certain jurisdictions may be restricted by law. Any persons reading this announcement should inform themselves of and observe any such restrictions.
THIS PRESS RELEASE IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES.
The Bonds have not been and will not be registered under the U.S. Securities Act
