Adidas Gets $654 Million in Year’s Largest Convertible Sale

Adidas AG (ADS), the second-largest sporting-goods maker, raised 500 million euros ($654 million) from the biggest sale of convertible bonds in almost a year.

The bonds can be handed over for stock in the company when the shares, which closed at a record 60 euros yesterday, rise 40 percent to 83.46 euros, Herzogenaurach, Germany-based Adidas said in a statement today. The notes due June 2019 will pay 0.25 percent interest, and the proceeds will be used to refinance debt and “optimize” its capital structure, Adidas said.

“Given the recent performance of Adidas shares, along with the high premium and low coupon, you need to really like Adidas to buy this,” said Tom Wills, who manages about $1.5 billion in equity-linked bonds at Morgan Stanley Investment Management in London. “That said, we’re certainly not complaining about the issuance.”

Convertible bond investors have been starved of new deals as companies benefit from record-low interest rates by selling traditional bonds. The last issuer to bring an equity-linked note of 500 million euros or more was Abu Dhabi’s Aabar, which raised 1.25 billion euros in a bond exchangeable for shares of carmaker Daimler AG.

Adidas has a 1.86 billion-euro revolving credit facility that matures in October, data compiled by Bloomberg show. The company also has a 500 million-euro, 4.75 percent bond due 2014, the data show.

High Grade

While rates are so low, issuance is likely to come from either high-yield companies seeking to reduce interest expense by selling investors an option on their stock, or investment- grade companies whose stock has soared, Wills said.

Adidas isn’t rated, though investor “consensus” is it’s in the low-to-middle part of the A category, according to a report by UniCredit SpA, the global coordinator for the deal.

Adidas has the right to call the bonds after 5.25 years if the shares trade at more than 30 percent above the conversion price for a set period, according to UniCredit. That allows the company to limit investors’ gains if the stock performs. Bondholders have an option to sell the bonds back to Adidas after the same period, protecting them if the shares fall, according to Milan-based UniCredit.

Technip SA, Europe’s second-largest oilfield-services provider and rated BBB+ at Standard & Poor’s, sold 498 million euros of 0.25 percent convertible bonds on Dec. 7.

UniCredit managed the transaction with Citigroup Inc. and Deutsche Bank AG.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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