Notes to the accounts
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19 Convertible debt
3.95 per cent convertible bonds due 2010 (“the 3.95 per cent bonds”)
On 16 October 2003, the company issued £240 million nominal 3.95 per cent bonds raising £233.4 million after costs. The holders of the 3.95 per cent bonds have the option to convert their bonds into ordinary shares at any time on or up to 23 September 2010 at 800p per ordinary share, a conversion rate of 12.5 ordinary shares for every £100 nominal of 3.95 per cent bonds. The 3.95 per cent bonds may be redeemed at par at the company’s option after 14 October 2008, subject to the Liberty International ordinary share price having traded at 120 per cent of the conversion price for a specified period, or at anytime once 85 per cent by nominal value of the bonds originally issued have been converted or cancelled. Unless otherwise converted, cancelled or redeemed the 3.95 per cent bonds will be redeemed by Liberty International at par on 30 September 2010.
Bondholders had the option to require redemption of outstanding bonds at par on 30 September 2007. No bondholders exercised the option to redeem bonds.
The net proceeds received from the initial issue of the convertible bonds was split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity as follows:
| Group and company | ||
|---|---|---|
| 2007 £m |
2006 £m |
|
| Net proceeds of convertible bonds issued | 233.5 | 233.5 |
| Equity component | (19.6) | (19.6) |
| Liability at date of issue | 213.9 | 213.9 |
| Cumulative amortisation | 19.2 | 16.6 |
| Cumulative conversions | (121.8) | (121.8) |
| Liability at 31 December | 111.3 | 108.7 |
The effective interest rate on the liability element at 31 December 2007 was 3.95 per cent (2006 – 7.1 per cent).