Better than selling off own shares to save company
Finnish phone maker Nokia is seeking to raise €750 million ($979 million) through convertible bonds in a desperate bid to prop up its rapidly sinking cash pile. Due in 2017, the bonds will be offered to international investors with the conversion price calculated as between 28 per cent and 33 per cent above the average price of the firm’s shares on the NASDAQ and Helsinki exchanges when the bonds go on offer in three days’ time [26th October 2012].With its share price at record lows and its credit rating equally in the doldrums, it’s expected the struggling manufacturer will use the cash injection to lower its debt – a gambit that’s preferable to risk diluting control of the company through selling its own shares instead.
Nokia’s move comes less than a week after it published its financial results for the third quarter of 2012, reporting a $754 million (€576 million) operating loss on $9.49 billion in net sales (€7.239 billion).
The losses followed Moody’s previous downgrading of Nokia bonds to “junk status,” the third credit rating agency to do so.
Meanwhile the company is gambling much of its future on new Lumia 920 and Lumia 820 smartphones running Windows 8, a strategy that many analysts question.
If the gambilt fails and sales of Nokia smartphones continue to fall the manufacturer may be forced further into relying on income from its low-cost range of Asha handsets – a market where there is stiff competition from Chinese rivals.