France Telecom's share price
| Source: Reuters |
A massive, well-flagged, marketed rights issue for a heavily indebted European telco during a war is by no means a sure-fire deal. So France Telecom's success in selling an astonishing e16 billion-worth is remarkable. The credit arguably belongs more to France Telecom than to any of the 21 underwriting banks. In a first for the equity capital markets, the issuer created a bidding process for the underwriting. At about 8pm on Friday, April 21, France Telecom asked 24 banks to indicate how much they would be willing to underwrite at a price of between e13 and e16, effectively building its own book.
Advised on the bidding process by Commerzbank, France Telecom structured the fees to encourage banks to bid aggressively. Bidders allocated more than e1 billion received 2.5%, banks that bid more than e1 billion but were allocated less got 2.25%, while banks that bid less than e1 billion got only 2%. The eight global coordinators got an additional 12.5 basis points and an 80bp success fee - half if the deal went well and half if the bank successfully distributed its rights.