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“I
would have to say British Aerospace into Orange was
a classic,” says Philippe Jarbre, partner at specialist
convertible bond asset manager GLG Partners, a London-based
division of US investment bank Lehman Brothers. It offered
the “opportunity to invest in a high-growth area
without the credit risk”,
he says.
“That
combination was unique in the market-place,” says
Jim Ziperski, managing director of equity capital markets
at Goldman Sachs in London. But the banks still faced
a challenge in spite of all the attractive qualities
of the deal – it was to be sterling-denominated.
“We know that since January 1, 1999 the euro-denominated
markets have flourished in size and liquidity. Sterling
became a non-core currency for the dedicated convertible
crowd.”
The
deal was also being launched into a market spooked by
the prospect of higher interest rates, which had absorbed
a record amount of equity-linked supply in the first
half of 1999. In spite of this, the banks closed the
books in one day, even though a two-day marketing period
had been planned. The deal was more than three times
oversubscribed.
After
originally offering a way into a UK telecoms stock,
the issue could be a gateway to all the major players
in the sector. Since the issue, Orange has been taken
over by German telecoms firm Mannesmann. In turn, UK
telecoms firm Vodafone Airtouch is now bidding for Mannesmann.
“It’s
going to be quite interesting to see what you end up
with,” says Steve Thornber, a fund manager at UK
fund management firm Threadneedle Investments. “It
looks like it will be based on Orange but convertible
into Vodafone shares and maybe a few in the new Orange
vehicle as well. It’s a winner all-round.”
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Jim
Ziperski of joint bookrunner Goldman Sachs:
says the deal was “unique in the market place”