Nokia is planning to raise 750 million euros ($980 U.S. million) by issuing bonds that can be converted. Nokia phones have not been selling very well in comparison to Apple and Samsung. Nokia’s cash reserves are falling and their credit ratings cut to junk in the last year.
Analysts said that Nokia needs to turnaround in the next several months to survive. Nokia’s shares fell to around 2 euros as of today and investors are worrying that the conversion of the new bonds into stock would reduce EPS. Some analysts are saying that the convertible bond choice is smart because convertible bonds pay lower interest rates than normal bonds because they offer investors the chance to make money when they are converted into shares.
Nokia has 3.6 billion euros in net cash as of September and that fell from 4.2 billion in June. Nokia also has 3.8 billion euros in interest-bearing liabilities with 1.75 billion in bonds and loans maturing in 2014.
Nokia also owns half of Nokia Siemens Networks and they ended the quarter with 1.4 billion euros in liabilities.
The convertible bonds are due in 2017 and will pay a coupon between 4.25%-5%. Nokia worked with BofA Merrill Lynch, Barclays, Citi and Deutsche as the joint book runners.