Telefónica €600 million equity linked bonds

Overview:

• Telefónica has issued new debt financing of €600 million through a structure combining the issue of equity-linked bonds and the purchase of cash-settled call options to hedge the options embedded in the bonds.
• The bonds are zero-coupon, meaning that no interest will be paid.
• The bonds have an embedded option, which can be exercised by holders in a period of time close to their maturity entitling holders to receive a cash payment determined in part by reference to the trading price of Telefónica's shares.
• The bonds are called "equity neutral convertible bonds" as neither Telefónica nor any of its group companies will be required to issue or deliver shares upon the exercise of such option rights or otherwise pursuant to the terms of the bonds and therefore will not be dilutive for shareholders.

Adam Majeed - Regional editor