Company: Colt Telecom
Date: July 1998
Amount: $1 billion
Bookrunner: Morgan Stanley Dean Witter
You’re a fast-growing fibre-optic telecom firm in Europe. You need $1 billion. But the European high-yield bond market is limited, you’re cautious about taking on that much debt, you don’t want to over-dilute your equity and you want a minimal cost of capital. What do you do?
The solution Colt came up with was a deal never tried before in Europe. The burden was split equally between a sterling share offering, a Deutschmark bond and a Deutschmark convertible.
“Many other telecom firms would just raise high-yield bonds all the time,” says John Doherty, director of investor relations at Colt. Certainly, US equivalents are comfortable with higher leverage. “But we wanted a balance between debt and equity. Our financial management style is very conservative.”
The deal exploited the high point of European financial markets, before the rouble crisis. “We caught it just right,” says Doherty: “It was one of the last big successful offerings.” Raising $1 billion in high yield was “not doable” according to an insider at lead manager Morgan Stanley.