Mannesmann deal hit by Orange

Last month's €2.3 billion issue of convertible bonds for Mannesmann promised to mark a revival of the convertible market, but within a week of its (successful) launch it was hit by Mannesmann's bid for Orange of the UK. At its launch on October 6, the deal was significantly oversubscribed, though it had been done on terms which raised plenty of eyebrows. The yield to maturity was 3.875%, towards the bottom of the indicated range and the premium conversion - the share price at which the bond could be exchanged for equity - was one of the highest seen this year at 38% above the prevailing share price. A high conversion premium usually points to a bullish equity market, but this deal came as the equity markets were looking rocky.