City bracing for bonds bonanza

A STRING of companies are expected to raise cash using convertible bonds in coming months, with media group Reuters predicted to be at the fore.

A convertible bond is debt that can convert into company shares at a fixed price in the future.

Following music publisher EMI's $243m (£153m) oversubscribed bonds offer last week, banking sources said companies with a similar debt profile or 'turnaround story' are accelerating their refinancing programmes.

Bankers close to companies including Reuters and insurer Prudential have been impressed by the early success of EMI and a slew of similar issues over the past few months.

'Reuters is a natural candidate - its shares are liquid, things are just beginning to get better on the operational front but it wants to avoid a credit downgrade that any other form of debt financing may trigger,' said a source close to the financial media group.

Hotels and gambling group Hilton this month issued a £300m convertible. Online retailer lastminute.com followed with a e103m (£73m) issue and computer services group LogicaCMG issued a e260m bond a day later.