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EchoStar plans US$1 billion bond issue
By Reuters staff
22 May 2001
Broadcast satellite company EchoStar Communications Corp. said on Monday it plans to sell $1 billion of convertible notes, becoming the latest company to tap the busy U.S. market for the hybrid securities.
The sale is expected on Thursday, market sources said.
EchoStar, which is based in Littleton, Colorado, said it expects to use proceeds for the construction, launch and insurance of additional satellites, strategic investments and acquisitions and other general corporate purposes.
The company would join at least 29 companies to have sold $15 billion of convertibles in May, a record for one month, according to ConvertBond.com, a division of Morgan Stanley.
Many companies are turning to convertibles as a way to raise cash at low cost. A convertible bond is a hybrid security that usually offers current income, can be converted into company stock and whose fortune is closely tied to the underlying stock price.
Earlier this month, a unit of local phone giant Verizon Communications Inc. sold $3 billion of convertible bonds, the third largest sale ever, while on Friday Merrill Lynch & Co. sold $2.04 billion.
EchoStar's seven-year subordinated notes are expected to carry a 5.25 to 5.75 percent coupon, and be convertible into EchoStar common shares at a 35 to 40 percent premium over the shares' then current price on the Nasdaq.
EchoStar shares closed up $1.03 at $36.58 in Monday trading on the Nasdaq. The stock's 52-week closing high of $54.13 was set last Oct. 2 while their 52-week closing low of $21.81 was set on Jan. 2. Morgan Stanley and UBS Warburg LLC are arranging the sale, sources said.
Moody's Investors Service rates EchoStar's existing $1 billion of 4.875 percent convertible subordinated notes maturing in 2007 "Caa2," a low junk grade.
EchoStar announced its sale after Nasdaq trading ended on Monday. Shares often fall after a company announces a convertible sale because some investors sell the underlying stock short and bondholders rank ahead of shareholders in a company's capital structure. |
