Issuer: Deutsche Telekom
Size: e2.3 billion mandatory convertible
Bookrunners: Goldman Sachs, Morgan Stanley
Deutsche Telekom's mandatory convertible looked like a great idea. The company had long been criticized for not tackling its e64 billion debt pile sufficiently quickly or effectively. The convertible was a chance of doing something positive and on a large scale.
Unfortunately, while the e2.3 billion deal, the largest-ever mandatory convertible in Europe and the US, was a big step in the right direction in fixing the balance sheet, it also had a deleterious impact on the share price.
The case for a mandatory deal
The deal was marketed as a way of issuing equity while limiting both the share price impact and dilution. But on the launch date, Deutsche Telekom lost more in market capitalization - e5.3 billion - than it raised through the convertible. Its market cap has subsequently fallen at least...
