Arcandor to price €300 million five-year convertibles to yield 7.875%-8.875%, up 20%-27%

By Rebecca Melvin

New York, June 25 - Arcandor AG planned to price €300 million of five-year bonds exchangeable into shares of Thomas Cook Group plc late Wednesday, which were talked to yield 7.875% to 8.875% with an initial conversion premium of 20% to 27%, according to a market source.

The unsubordinated, unsecured exchangeable bonds, being sold via ABN Amro, Bayerische Landesbank and Dresdner Kleinwort as joint lead managers and joint bookrunners, have a greenshoe of €50 million.

There is an investor put and issuer call at par after three years, with the latter subject to a 130% share price trigger.

The bonds have dividend protection and a change-of-control put at the greater of parity, par and a measure of the bond value that is adjusted by the parity change over the change-of-control event.

Arcandor plans to use proceeds to enhance financial flexibility for continued growth and for refinancing existing credit facilities owed to a syndicate of banks, including the joint lead managers.

Arcandor has arranged in the terms of the bonds to keep the amount of holding in Thomas Cook constant when repaying the bonds.

"The three core business units of Arcandor Group, Thomas Cook, Primondo and Karstadt report sound operational progress and we continue to swiftly develop them.We are therefore continuously evaluating strategic options for the consolidation of the markets in which these business units operate. In this context, the issue of the bonds contributes to our financial flexibility," said Arcandor chairman Thomas Middelhoff in a news release.

Arcandor will also enter into agreements with Dresdner Kleinwort to allow the purchase by Arcandor of call options relating to up to about 3.5% of Thomas Cook share capital to help offset Arcandor's exposure in relation to the bonds. These agreements may result in significant volumes of trading in Thomas Cook shares.

Arcandor is a German mail order and department store company.

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