Nokia issues £610 Million Bond to Raise Cash

on Oct 24, 2012

Nokia (NYSE:NOK) has decided to issue €750 million (£610 million) in convertible bonds with the company looking to boost its dwindling cash position.

**Convertible Bonds to Boost Liquidity**
The Finnish company, which used to be the largest handset maker in the world, recorded heavy losses in the past months falling way behind Apple and Samsung in the smartphone race.
The company will issue the €750 million (£610 million) bond with the purpose of shoring up its balance sheet and meeting its obligations on a €1.25 billion (£1.02 billion) note maturing in April 2014.

“This offering is designed to further strengthen our financial position and liquidity profile while allowing us to benefit from the current attractive long-term financing opportunities in the convertible bond market.” said Timo Ihamuotila, Nokia’s CFO, as quoted by the Financial Times.
Convertible bonds have become popular in Europe, as they pay a fixed interest rate but can also be turned into a predetermined amount of the company’s equity allowing investors to gain from positive movements in the stock.

The new Nokia bonds have their maturity date in 2017 and will start trading by the end of the week with an expected coupon payment of 4.25-5 percent of the face value. The convergence to shares will probably be realised at a premium of 28-33 percent above the weighted average share price between the launch and pricing of the bonds.
**Nokia’s Financial Woes**

!m[The Finnish Phone-Maker Launches Low-Priced Lumia For Emerging Markets](/uploads/story/631/thumbs/pic1_inline.png)In 2012 the company’s debt has been downgraded to junk status by all three leading rating agencies due to falling sales and weak revenues.
In July, Moody cut its long-term debt rating to Ba3 from Ba1 – three levels below investment grade status as a result of the second-quarter results that revealed a rapidly deteriorating operating margin for Nokia.

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From June to October, the phone maker’s net cash has fallen by €600 million (£488 million) to €3.6 billion (£2.92 billion) and many analysts think that unless the company achieves a turnaround it won’t be able to survive.
Nokia finished the third quarter with €3.8 billion (£3.01 billion) in interest-bearing liabilities and has four outstanding bonds in the market worth a total of €2.9 billion (£2.36 billion) with maturity dates in 2014, 2019 and 2039. The company also owns half of the network-equipment venture Nokia Siemens Networks, which finished the quarter with €1.4 billion (£1.1 billion) in liabilities.
**Lumia 510 – Cheapest Nokia Smartphone**
This week Nokia unveiled the Lumia 510, its cheapest smartphone based on Microsoft’s Windows software. The handset has a retail price of $199 and runs on the Windows Phone 7.5 platform.
Lumia 510 will mainly target emerging markets and is planned to start selling next month in the Asia-Pacific and South America regions.
“With the Nokia Lumia 510 we continue to meet our commitment to bring Windows Phone to new, low price points,” said Jo Harlow, head of Nokia’s smartphone business.
The new smartphone, which features a four-inch display and comes in red, yellow, cyan, white and black, is an attempt by the phone-maker to win over customers in fast-growing markets outside of North America and Europe where Apple and Android devices dominate.

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