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KPN cleans up with complex deal

When Dutch telecoms company KPN did a e2.1 billion combined simultaneous tender and exchange in July, joint lead managed by Deutsche Bank and Bank of America, it was one of Europe's most complex liability management deals.

KPN wanted to extend its maturity profile and lock in low interest rates. It wanted to clean up its short-dated liabilities and, in particular, reduce the outstanding on its e1.5 billion 3.5% convertible bond due in 2005 and its guilder bond due in 2006.

It was decided that KPN would finance the tender with new bonds. ?One of the reasons for tender and refinancing, rather than one big exchange, was because they wanted to clean up guilder and short-dated convertible issues and we knew that these investors wouldn't necessarily be able to switch into straight bonds,? says Ian Harjette, head of European high-grade debt syndicate at Bank of America.

It was going to be a large-scale refinancing, given the size of the outstanding 2005 and 2006 maturities, and KPN didn't want to issue one new jumbo bond and create another large spike in its maturity profile. As the best new maturities for the company were  five and seven years, it decided to issue one of each to finance the tender.

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