Nokia’s ongoing efforts to restructure and invest in a new direction for its mobile phone business is pushing the company into borrowing against its reserves: today the Finnish company said that it would make an offering in Europe of senior unsecured convertible bonds amounting to €750 million ($979 million), which it said that it would use to service debt “while preserving existing pools of liquidity and for general corporate purposes.”
The company’s cash position has slowly been eroding over the past several quarters as it continues to lay off people, close down factories in the wake of weaker smartphone sales. At the same time, it has been making big investments in trying to revive that business, by rebuilding it around the Windows Phone operating system.
In the company’s Q3 results last week, the company noted that it had €8.8 billion in gross cash, and €3.6 billion in net cash. But its net cash from operating activities was €429 million, “including cash outflows related to restructuring activities of approximately EUR 390 million.”
Nokia notes that this bond is not an offer of securities in the U.S., Canada, South Africa, Australia or Japan.
The company has been seeing massive downgrades from all the major credit ratings agencies, with its down to junk status in some cases for its senior unsecured notes. Each time, Nokia has insisted that its cash position is strong as it continues to restructure. Today’s move seems to indicate that while that may still be the case, the ongoing losses at the company continue to chip away at its baseline health.
Nokia says the bonds will be rated at 4.25% and 5.00% per annum payable semi-annually in arrears on April 26 and October 26 in each year, starting on or about April 26, 2013. It notes that the initial conversion price is expected to be set at a premium of 28% to 33% above the volume weighted average price of Nokia shares on NASDAQ OMX Helsinki between launch and pricing of the offering.
Nokia’s share price closed at $2.81 on the NYSE yesterday, at the low end of its 52-week range.