Omnicom eyes resale of 0% LYONs convertibles back into market

By Rebecca Melvin

New York, Feb. 11 - Omnicom Group Inc.'s recently put 0% LYONs convertible notes due 2031 will be sold back into the market based on acceptable bids on the paper, but Omnicom won't be posting offer prices or making a market in the paper, a company executive said Wednesday.

"We don't have a trading desk," Eric Huttner, an executive of Omnicom Capital, a wholly owned subsidiary of Omnicom Group, explained.

He said that "as the result of a lot of work over the last few months, we've developed a structure and found investors and formed a partnership" to hold these convertibles.

"We've had these bonds outstanding for eight years, and we want to continue to have them outstanding," said Huttner, who added that he has already taken calls from potential buyers.

Omnicom may do the same thing with bonds that come due July 31, depending on market conditions, Huttner said.

Part of the attraction of the structure was that it didn't involve going back to the company's bankers, Huttner said. And the borrowings used to finance the buybacks were at a rate so low that it isn't a factor in when or whether the convertibles are resold.

On Feb. 9, holders of the Omnicom convertibles put $841.2 million principal amount of notes, and Omnicom repurchased them with borrowings under a five-year revolving credit facility and a portion of funding from unaffiliated equity investors.

Omnicom purchased the convertibles at par and retired $295.2 million principal amount of notes. The remaining $546 million principal amount of convertibles were purchased by a partnership controlled by Omnicom.

"It all depends on how much they want to pay," Huttner said about the amount at which the bonds will be resold.

The partnership was viewed as a novel idea by several market sources.

One New York-based sellsider thought that if Omnicom sold the convertibles at a discount, they would be paying the discount twice, and perhaps Omnicom would sweeten the terms to the notes to get par if possible.

Maybe "they'd get rid of the 2010 and 2011 puts and add shares and coupon," he said.

Omnicom is a New York marketing and corporate communications company.

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