Inmobiliaria Colonial gets regulatory OK to issue €1.43 billion convertibles due 2014

By Angela McDaniels

Tacoma, Wash., Dec. 10 - Inmobiliaria Colonial said the Spanish Securities and Exchange Commission has approved the prospectus for the €1.43 billion convertible bonds due March 14, 2014 the company plans to issue at the end of December.

The convertibles will bear interest at 12-month Euribor plus 400 basis points. Interest will be compounded and increase the par value of the convertibles.

The conversion price will be €0.25 per Colonial share, and conversion will be mandatory at maturity, according to a company news release.

The convertibles will be convertible in three conversion periods. The first period will begin six months after issue and will end on the third anniversary of the issue date. During this period, holders may exercise their conversion rights during the months of March, June, September and December each year.

The second and third conversion periods will respectively coincide with the fourth and fifth anniversaries of the issue date.

The company's shareholders have a preferential subscription right for the convertibles that may be exercised though Dec. 20. Shareholders may subscribe for one bond with a par value of €100 for every 117 shares held.

Colonial said the issue, which was approved by its general shareholders at a meeting on Nov. 21, is a key component to the debt restructuring agreement signed by the company in September.

Under the agreement, the lead banks of Colonial's syndicated loan - Goldman Sachs, Eurohypo, Calyon and Royal Bank of Scotland - and Banco Popular and La Caixa agreed to backstop the convertibles issue up to a maximum of €1.3 billion.

Colonial previously said that proceeds from the issue will be used primarily for the early amortization of part of its long-term financing facility.

The convertibles issue is expected to reduce debt by 16% to €7.55 billion and increase equity by 124% to €2.58 billion. The positive impact of the transaction on cash requirements will also be "very substantial," the company said, with an estimated saving of €120 million per year.

As previously reported in September, Colonial restructured more than €7 billion of borrowings after reaching agreement with its syndicated loan's arranging banks and other bank creditors.

The refinancing covered all operating liabilities without collateral in addition to the company's syndicated loan, and other bilateral lenders agreed to buy some of Colonial's non-strategic assets - mainly residential land - to enable repayment and to provide cash.

Colonial is a real estate company based in Barcelona, Spain.

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